Bonds Plunge 25bp as JPMorgan Predicts Cautious Central Banks
Global bond yields plunged after US-Iran ceasefire drove European sovereign yields down over 25 basis points, sending the 10-year U.S. Treasury yield to 4.25%, its lowest since mid-March. JPMorgan Asset Management expects central banks to err on the side of caution, while JPMorgan strategists warn Gulf investments face long-term damage.
1. Ceasefire Drives Bond Rally
News of a US-Iran ceasefire paused regional hostilities, prompting European sovereign yields to fall by more than 25 basis points and the U.S. 10-year Treasury yield to drop to 4.25%, its lowest level since mid-March.
2. Revised Rate Expectations
Interest-rate swaps now assign almost a 50% probability to a Federal Reserve rate cut this year, while the chance of an ECB hike in April has been slashed to around 30%.
3. JPMorgan’s Cautionary Outlook
The head of JPMorgan Asset Management notes the inflation shock is muted but growth risks are heightened, leading central banks to likely err on the side of caution in policy decisions.
4. Long-Term Gulf Investment Risks
JPMorgan strategists caution that the conflict has eroded the Gulf region’s appeal as an investable hub, potentially inflicting prolonged damage on foreign capital inflows.