Capital Macroeconomics: Global bond markets may bear up to most of the pain brought by war.

Kai-Tuo Macro stated in a client report that the damage to government bond markets caused by the Middle East conflict may be more lasting than the damage to stock markets. The rise in yields this year largely reflects changes in monetary policy expectations. The institution added that the key question is whether this war has had a lasting impact on the monetary policy path. Kai-Tuo Macro indicated that the answer seems to be yes. Currently, the likelihood of the Federal Reserve or the Bank of England cutting interest rates this year is slim, which is contrary to pre-war expectations. The current market pricing generally supports this scenario. The institution stated that this indicates that even if market sentiment improves, the bond market is unlikely to experience a broad-based rebound.