US‑Iran ceasefire lifts bond yields, rate cuts fade
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- U.S.-Iran ceasefire announced late Tuesday brought a decline in oil prices and a rally in equities and bonds, providing immediate market relief.
- FTSE World Government Bond Index fell more than 3% in March, marking its steepest monthly decline in over a year.
- U.S. Treasury yields have only retreated to mid‑March levels, showing markets are not yet convinced of a sustained downward trajectory for rates.
- United States investors are abandoning earlier expectations of aggressive rate cuts across major economies, now seeing a greater likelihood of rates staying elevated longer.
- India kept its policy rate unchanged but signaled readiness to tighten if inflation intensifies, reflecting a more cautious stance.
- Japan sees easing concerns over energy supply disruptions strengthening the case for policy tightening.
- China scales back expectations for monetary easing as global inflation dynamics spill over into domestic considerations.
Why it matters: Investors and bond managers must adjust portfolios for persistently high yields, while borrowers face higher financing costs and governments confront tighter funding conditions; central banks’ limited ability to cut rates keeps inflation control as priority, curbing growth‑stimulating policy and limiting the scope for future monetary easing.
