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Reflation Trade Gets Shot in the Arm With Rate Hikes in Focus

  • Yield surge is ‘duration spoiler’ for BNY Mellon’s Velis
  • Treasuries selloff spills over to credit, emerging markets
Updated on

A wave of reflation bets sweeping across global markets is prompting traders to brace for an end to the low interest-rate regime earlier than expected.

The ramp-up in inflation expectations intensified a selloff in Treasuries sending the gap between the 5- and 30-year yields to the widest since October 2014 and bringing forward expectations for U.S. rate hikes to as early as mid-2023. That’s reverberating across assets from credit to emerging markets, and emboldening commodity bulls who are betting on a super-cycle to drive a surge in prices including for copper.