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Sentiment in the debt market has improved as market participants have shrugged off fears about a recession in the US economy. Investors believe that the economy is on a sound footing. At present, the amount of bonds with negative yields has contracted notably worldwide. Earlier, bonds worth record high $17 trillion traded with negative interest rates. Investors in the debt market are in the elevated mood amid the progress in the US – China trade talks and the waning likelihood of a no-deal Brexit. In the summer, investors were alarmed by the biggest spread between the 3-month and 10-year US Treasuries since April 2007 that signaled a recession in the US.
In the summer, market participants got into panic due to the escalating trade war, a slowdown in the global economic growth, and the looming hard Brexit. Now they realize that global prospects are not so gloomy. An analyst from Citigroup (Hong Kong) advises investors to turn attention to the equity market and high-yielding bonds in three – six months ahead. The only culprit to dent investors’ confidence is weak PMIs from the five largest global economies and employment data from the US. So, it would be a good idea to wait for these reports before making trading decisions.
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