Lyxor's Barjou: Bonds are not out of the woods yet

Fixed income investors could face a challenging end to the year, as the combination of shrinking central bank balance sheets and still solid growth data could be a headwind for bonds.

True, inflation has been contained for now, but in the US Treasuries are setting the tone for global bond markets and wage dynamics have been gradually accelerating. The move is not eye-catching, but hourly earnings growth has slowly been creeping above 2%, while total compensation measures are growing close to 3%. This has been putting upward pressure on all the components of nominal yields. 10-year Treasury yields are up by close to 30bps since the end of August, leaving the year-to-date performance on the asset in negative territory by the end of October. It is not necessarily t...