October 14, 2020 | By Hank Cunningham
We expect the stop-and-go U.S. economic recovery to continue; it may begin to falter unless another round of fiscal stimulus happens. There is uncertainty about this stimulus and there is also the matter of the election.
For now, inflation expectations have eased. Central banks have maintained liberal monetary policies with no change likely for a couple of years. The burden thus falls on the fiscal side where more stimulus is necessary while the pandemic continues.
There is an upward bias to bond yields and there is a possibility that the U.S. Ten-year note could reach 1%. Central banks are loath to let rising bond yields interfere with the recovery. While they appear to be opposed to formal yield curve control, they could extend the term of their quantitative easing purchases to contain yields.
Consumer confidence and retail sales will continue to be key indicators for the trend of the economy and bond yields.