Global yields surge

Global yields are entering a higher-for-longer regime, creating more attractive income opportunities but keeping bond volatility elevated.

• The US 5-year yield moved above 5% for the first time in two decades, while Germany’s 10-year yield reached 3.6%, its highest level since 2009, and Japan’s 10-year yield exceeded 3%.
• The average yield on global government debt approached 4%, its highest level since 2007, as strong US manufacturing and services PMIs, higher oil prices and a weak US debt auction pushed yields higher.
• Brent crude rose above $105 a barrel, while markets priced a more hawkish Federal Reserve and heavy government and corporate borrowing; Amundi sees investment and funding needs as structural sources of high yields, with Fed repricing and oil uncertainty explaining the latest move.
• September’s US PMI reached its highest level since mid-2021 and hiring accelerated at its fastest pace in more than four years, while the euro-area composite PMI rose to 53.1 and input and output price pressures reaccelerated.
• Bank Indonesia kept rates unchanged and is expected to prioritise rupiah stability after a 100-basis-point rate-hiking mini-cycle in May and June; high real yields and a stronger dollar weighed on gold.

Takeaway: Investors should consider diversified and dynamic exposure to bonds to capture higher portfolio income, while allowing for continued rate and bond-market volatility driven by resilient activity, inflation risks, oil prices and refinancing needs.