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Analysis: As bond selloff gets real, policymakers face fresh headache

Analysis: As bond selloff gets real, policymakers face fresh headache
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Why the reflation trade can work for Gulf economies

Why the reflation trade can work for Gulf economies  Cornelia Meyer Short Url https://arab.news/vc7mp US Treasury yields have turned positive. The most significant jump was the 10-year Treasury note, which jumped from 0.72 percent in September to 1.375 percent on Monday morning. The questions to ask are: What is behind the move? What does it mean for equity markets? And what are the implications for emerging markets, especially the Gulf Cooperation Council (GCC)? The name of the story is reflation, or rather a fear of inflation.  Since last March, central banks have pushed $6.6 trillion of liquidity into their economies and are expected to follow suit with an additional $5.8 trillion later this year, according to Cross Border Capital, a London-based consultancy. This is monetary stimulus alone, which is enhanced by huge fiscal stimuli in the US. Last year’s monetary expansion was the largest in 150 years. On top of that, the fiscal stimulus amounted to $2.9 trillion. It is

Asset managers rush to shore up portfolios against inflation

Signs that inflation is making a comeback are unsettling big investors. Past periods of high inflation have weighed heavily on real returns from stocks and bonds, which have flourished over the past.

The world is approaching an inflection point

Domestic challenges and US political developments have proved such a preoccupation recently that it has been all too easy to miss a key global shift. China’s rise to global prominence has accelerated markedly as a result of the past year’s events. This is not to blame Europeans for underestimating the transition. To put it mildly they have had to contend with immense domestic difficulties. At the same time, the bizarre spectacle of the US presidential transition has proved a compelling distraction. Yet looking eastwards it should be clear that the world is approaching an inflection point. Shifting economic fortunes are a good place to start. China’s GDP rose by 2% in 2020 compared with a drop of 3.6% in the US and a 7.4% fall in the euro-zone. That is according to World Bank estimates published in January.

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