The rise in US long-term bonds yields continued in March, with the 10-year treasury rising to around 1.75%, approaching the 2% observation threshold set by the FED. At its March meeting, the FED maintained its position by confirming monetary policy and keeping reference rates unchanged. This movement also continued on European and Swiss government yields, although less markedly.

The reasons for the upward trend in dollar bond yields are linked to the prospect of an improvement in macroeconomic data and a positive development in the health situation. In fact, President Biden announced that he had reached his goal of 100 million vaccinations in his first 100 days in office well in advance and doubled his ambitious goal to 200 doses administered in the same period. Also in March, Biden unveiled a $2 trillion plan to support the rebuilding of America, which not only aims to strengthen America’s infrastructure network at all levels, creating millions of jobs, but also to reshape the entire American economy with a focus on climate change issues and social and racial inequality.

All of this, along with rising commodity prices, has raised expectations of rising inflation.

These developments seen in the bond market have also contributed to increased volatility in equity markets. In the United States the results were mixed, with the S&P500 index posting a performance of +1.80%. The Nasdaq, on the other hand, fell by 2.50%, where sectoral rotation from technology stocks continued in favor of more cyclical stocks. Europe did very well with the EuroStoxx index up 5.70%, which reached new all-time highs. The peripheral countries also did well with the German DAX index up 7% and the Italian FTSE MIB index up 5.94%. Switzerland was also positive with the SMI index up 3.15%. On the other hand, all the Asian markets suffered, with the Chinese CSI 300 index down 6.80%, the Japanese Nikkei index down 1.60% and the Hong Kong index down 3.65%. Fears related to rising inflation in the US hit China hard where a strong sell off was registered especially in the technology sector.

The topic of inflation will be much debated and uncertain and will certainly be a variable that will need to be kept under control in the coming months. We believe we are still far from the critical thresholds for which the various central banks will decide to change their monetary policies, but we must remain very vigilant.