U.S. treasury yields have likely peaked, with longer-dated bonds looking attractive as the Federal Reserve is near the end of its hiking cycle, M&G Investments' Jim Leaviss said.
"Unless we get a resurgence in core inflation from where we are now, then it should be the peak in bond yields," Leaviss, chief investment officer for public fixed income at M&G, told theU.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as"10 years, 20 years, really, lot further out the curve … we'll probably see a bold steepening when people believe that the end is here for the Fed." Leaviss said.
"The markets have hated the fact that whilst headline inflation has been coming down, as it has everywhere in the world, core inflation rate in the UK has actually been going up," he said. "The thing that makes me bullish on gilts - but more bearish on activity the outlook for the UK economy - is that once those rate hikes start working … the transmission mechanism through mortgages rents," he added.
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