Fed rate cut expectations have been frustrated, even erasing last year's bond yields

Huitong Financial News Investors who bet that last year's global bond rally will continue have been brutally reality checked. Expectations that U.S. interest rates will move higher for longer, combined with this week's hot inflation data, have helped erase the 4.2% return on global sovereign debt since 2023. Last year, bond investors barely made a profit after 24 consecutive months of losses on bets on a Fed pivot, but bearish sentiment returned as data continued to highlight the resilience of the U.S. economy. Gareth Berry, a strategist at Macquarie Group in Singapore, said the risk was that losses could widen. A key danger is that mark-to-market losses are too large and could lead to a forced sell-off in the bond market.