Regarding the recent rise in US bond yields to a decades-high level, Castle Securities believes that the reason behind this is strong US economic growth and increased competition for capital, not a rise in market concerns about inflation. Nohshad Shah, head of fixed income sales at Castle Securities in Europe, the Middle East, and Africa, wrote in a report to clients on Monday that almost all of the increase in 10-year US Treasury yields in September came from actual yields, while inflation expectations were relatively stable. Real returns reflect that the US economy is supported by fiscal easing, a relaxed financial environment, and huge investments in artificial intelligence. The market is “evaluating the intensity and sustainability of economic growth... and the real interest rate needed to accommodate this growth,” he wrote. “Investors are essentially demanding higher returns after excluding inflation, not just more protection against inflation.”

Regarding the recent rise in US bond yields to a decades-high level, Castle Securities believes that the reason behind this is strong US economic growth and increased competition for capital, not a rise in market concerns about inflation. Nohshad Shah, head of fixed income sales at Castle Securities in Europe, the Middle East, and Africa, wrote in a report to clients on Monday that almost all of the increase in 10-year US Treasury yields in September came from actual yields, while inflation expectations were relatively stable. Real returns reflect that the US economy is supported by fiscal easing, a relaxed financial environment, and huge investments in artificial intelligence. The market is “evaluating the intensity and sustainability of economic growth... and the real interest rate needed to accommodate this growth,” he wrote. “Investors are essentially demanding higher returns after excluding inflation, not just more protection against inflation.”