With an uncertain backdrop surrounding global growth, interest rates around the world declined last week. Several key factors contributed to their decline: the rising uncertainty related to Brexit, weak European PMI data and the outcome of the FOMC meeting.
This week will see more headline news on whether Prime Minister May can keep control of the Brexit proceedings or if politics in the U.K. will throw the process into further chaos. In the U.S., comments from the Federal Reserve last week also added to the concern around global growth and future interest rate policy. The U.S. 10-year Treasury fell to 2.44%, its lowest level since late 2017. With European growth already slow, the German 10-year is now trading at a negative interest rate, joining several other key markets around the world in the same circumstance.
I still believe economic growth will come close to current expectations; however, the fall in interest rates is a powerful sign that headwinds do exist. The news for emerging market economies is probably more tenuous than for the developed world, given the policies and political backdrop of industrialized economies.
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