Central banks around the world are currently viewing policy as tight and are looking to make gradual cuts. However, if employment rates show signs of weakening, they are prepared to make faster cuts. Conversely, if employment numbers improve, their cuts will be more measured.
Just two months ago, bond markets were indicating a significant risk of central banks falling behind the curve. Now, that recession risk has lessened, leading to an increase in yields. Despite this shift, experts like Dario Perkins, managing director of global macro at TS Lombard, believe that this does not necessarily spell doom for risk assets. Perkins stated in a note to clients on Oct. 17 that the rise in yields does not indicate that the Fed has made a misstep in its policy decisions.
