Global investors temper bond yield expectations amid record rate cuts optimism
Over two-thirds think the Federal Reserve will be the most important driver of bond yields in 2024.
According to the latest Bank of America Global Fund Manager survey, investors have scaled back expectations on bond yields, following the 100bps rally in long-term rates over the past two months.
The survey found that 55% of respondents expect lower bond yields over the next 12 months, down slightly from a record 62% in December 2023, while expectations for lower short-term rates reached a record-high this month.
Global investors remain set on Goldilocks soft landing despite bearish stance
Over two-thirds think the Federal Reserve will be the most important driver of bond yields in 2024, well above those who see global growth (15%), US fiscal policy (9%), or the Bank of Japan (5%) as the main drivers.
With only 3% of respondents expecting higher rates, January's most crowded trade was long-duration tech, with long 30-year Treasury no longer seen as the best way to play a Fed rate-cutting cycle over the next six months.
This follows an improvement in global growth expectations, with the net percentage of investors expecting a stronger economy in the next 12 months rising to a 12-month high.
Bank of America forecasts no rate cuts for UK until 2025 due to 'entrenched inflation'
The majority (79%) of investors expect the global economy to experience either a «soft» or «no» landing in 2024, a nine-month high.
Conversely, only 17% expect a «hard» landing, a nine-month low, while only 2% stating that a recession is likely in the next 12 months, down from 15% in December.
January's biggest tail risks were geopolitics worsening (25%), an economic hard landing (24%), higher inflation (21%), a systemic credit event (11%), the US
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