Fixed Income Risk Appetite Headed for Euphoria

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The global appetite for fixed income remains strong, driven by ongoing accommodation from central banks. The 10-year Bund yield touched fresh lows for the year today. The situation is similar for shorter maturities.

10 Bund yield

This yield compression is not limited to bonds. As an example, Asian commercial property yields are at new lows as well. For those who want some background on the meaning of "property yield", here is a good overview.

Asia property yield
Source: WSJ

The Credit Suisse Duration Risk Appetite Index is once again headed for euphoria after being in panic territory just a year ago.

Duration Risk Appetite Makes New High
Duration appetite index
Source: Credit Suisse

The index measures investors' appetite for being long fixed income product — as they shift from taper fears last summer to frenzied buying today. The longer the current environment persists, the more difficult it will be for central banks to begin rate normalization.


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