For example, 10Y US Treasury yields climbed from c.
2.0% in September 2017 to above 2.9%, and meanwhile
10Y Bund yields rose to more than 0.8% and are now
trading at roughly 0.7%, i.e. Significantly higher than in
December 2017 (0.3-0.4%) – and remember that they
were still negative in October 2016. Japan is the only
country where 10Y government bond yields are still near
zero. This is clearly due to the ultra-expansionary
monetary policy, which targets, among other things, a 10Y
yield of 0%.
The yield increase is driven by expectations of a less
expansionary (future) global monetary policy, as economic
growth in major developed and emerging markets is
currently quite strong and synchronised.
financial market participants increasingly expect robust
economic growth to be supported even further by a more
expansionary, and thus pro-cyclical, fiscal policy, in
particular in the US, but also in Germany. With capacity
utilisation above the average (and excess utilisation rising)
in many economies, wages and, in turn, inflation are likely
to pick up more significantly.