E Economics

Global Yields Skyrocket Amid Hawkish Central Banks

18 March, 2021



Since yesterday night, a few central banks from both advanced and emerging economies have sent hawkish signals pushing global yields higher today.

 

global yields

 

This morning, Nikkei said the Bank of Japan is considering widening the movement range around its 10-year bond yield target at the end of a policy review Friday. Some investors viewed the widening of the range as a step in the direction of policy tightening.

 

Later, Bloomberg reported that “Norway’s central bank brought forward the timing of what will probably be the rich world’s first cycle of interest rate hikes since the pandemic broke out. The Oslo-based bank, which kept its main rate unchanged at zero on Thursday, as predicted, said it now expects to start raising its benchmark deposit rate in the “latter half” of this year.

 

Focusing on emerging economies, Turkey’s central bank hiked rates by 200 basis points to 19% on Thursday, the highest since July 2019 and twice the market expectation. According to Reuters, “The decision had been seen as a test of new Central Bank Governor Naci Agbal’s battle against double-digit inflation and his hawkish recent rhetoric, given President Tayyip Erdogan’s repeated opposition to tight policy.

 

Yesterday night, the Central Bank of Brazil’s Monetary Policy Committee (Copom) raised the benchmark interest rate from 2 to 2.75 percent (vs 2.50 percent expected), the first increase since July 2015. Bloomberg underlined that “With inflation expectations quickly deteriorating, Campos Neto not only delivered the biggest interest rate increase in more than a decade but also signaled for the next meeting another hike of the same magnitude: 75 basis points, which boosted the Selic to 2.75% on late Wednesday and will likely take it to 3.5% in May.