By Dhaval Joshi, chief strategist at BCA Research
Executive Summary
- 30-year bond yields in the US, Japan, Germany, and the UK have moved in lockstep through the past two months.
- This is irrational because the fundamental drivers of bond yields – creditworthiness, inflation expectations, and debt sustainability maths – have not moved in lockstep.
- Ranking the bond markets on these fundamentals, Germany and the UK look the best, Japan and the US the worst.
- Hence, today we are opening a new relative value position in 30-year government bonds:
- Overweight UK gilts and German bunds (50:50) versus US T-Bonds and JGBs (50:50).
