Is the market pricing in disinflation?

The market is pricing disinflation in to longer-dated government bonds, and rather than causing concern, this trend will be positive for markets, argues John Stopford, co-head of Investec Asset Management's multi-asset team.

Bond yields have remained low throughout quantitative easing, although tapering is on-going in the US. Indeed, the case for interest rate rises in the US and UK is growing. The fall in yields on longer-dated maturities indicates a growing consensus that disinflation trends will persist. This is very positive for financial markets. While it is still possible that a strengthening global economy and a return of inflationary pressures could cause government bond yields to rise, the upside risk is less than it looked six months ago. With inflationary pressures low, real interest rates a...