Global Markets Overview: August 2022

In this report we highlight how global interest rates markets and their expectations for future interest rates have moved over the last three months.

• In North America, US bond yields still imply further policy rate hikes over the next year but more aggressive easing thereafter. In Canada, the expected peak in policy rates is broadly unchanged and the future pace of easing priced-into the market is in-line with the US.
• In Europe, Eurozone policy rates are now expected to fall over the next two years as recession, rather than inflation fears, has driven bond yields. Expectations for UK rates have fallen by less than the US, which is consistent with UK inflation likely being more “sticky” at high levels.
• In Asia, Japanese bond yields and priced-in policy rates are low and largely unchanged due to the central banks' explicit policy of controlling the bond yield curve. Whereas, Australian bond yields are the highest among the major markets and rates are priced to carry on rising.