Barclays analysts issued a warning on Thursday about the challenging future facing global bonds, unless there is a significant downturn in equities. They pointed to several factors contributing to this outlook, including the US central bank's quantitative tightening program and rising deficits.
The analysts also noted the shift of Japanese investors towards domestic debt, following policy changes by the Bank of Japan. This shift, coupled with weak demand from foreign central banks, further threatens the appeal of U.S. Treasuries.
According to the Barclays team, only a substantial re-pricing lower of risk assets can stabilize the bond market. They believe that the recent 5% drop in the S&P 500 Index is insufficient to trigger a rebound in fixed income. The analysts argue that a more significant downturn in equities would be necessary to bring about stability in the bond market.
This analysis comes at a time when global financial markets are grappling with multiple challenges, including policy shifts from central banks and economic uncertainties. As such, investors and market participants will likely keep a close eye on developments in both the equities and bond markets over the coming weeks and months.
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