It looks like Morgan Stanley decided to name 2016 the Year of the Bull in the bond market. The recent decisions of financial regulators and global economic health in general have affected the experts’ stance. The bank believes that the most marketable product this year will be bond securities. A report from Morgan Stanley points out that the current year would not be rich in good news. Economic growth rates would be weak, which - alongside soft monetary policy in developed countries – would reduce US 10-year yields to 1.45% by the end of September. Yields and demand are inversely correlated in the bond market: yields fall when demand rises. According to most analysts, the US Federal Reserve will stand pat on its key interest rate in 2016.
Treasuries received key growth momentum amid the unprecedented monetary easing that central banks in Europe and Japan have adopted. Negative rates introduced by the Bank of Japan along with extra 20 billion euros to the QE budget announced by ECB President Mario Draghi were a true gift for bond market participants. However, not everyone shares the viewpoint of Morgan Stanley’s analysts. For instance, Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd., said that US yields will probably diverge from those in Europe and Japan, Bloomberg reports. "In Europe and Japan, there's no upside pressure on yields," Jolly said. "In the case of the US, we do see upside pressure. We think that the Federal Reserve will come back and raise interest rates a couple times this year," Peter Jolly stated.
