Wary Global Bond Markets Brace for the Supply Floodgates to Open
- U.S. effective supply to ease; global market will expand
- Extra issuance, rate hikes haunt market after 6% loss in 2021
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The amount of government bonds hitting the private sector is set to swell in 2022, adding pressure on yields to rise further as investors across most major markets absorb much larger helpings of debt.
While governments are set to pare borrowings as fiscal outlays ease, the $2 trillion drop in central banks’ net demand will provide a risky real-world test of how much private demand exists. With inflation driving most policy makers to err on the side of tighter settings -- some central banks already plan to start trimming their balance sheets -- investors will need to absorb an increase in effective supply of about $230 billion.