Flash: US yield run-up induced by Fed – UBS

FXstreet.com (New York) - According to Research Analyst Gareth Berry at UBS, “The Fed's recent decisions have driven up US yields – regardless of whether the scale of the moves was justified, conditions have clearly changed and similar shifts are being transmitted across the globe.”

Our EM team has highlighted the risks of higher nominal yields for the funding situation in developing economies, but the UK (and other developed nations) also faces a sizeable funding gap and delicate growth trajectory which could be jeopardized by higher nominal yields (and even real yields if disinflation becomes sticky).

Moreover, “the BoE has also highlighted risks to the financial sector from these changes in the latest Financial Stability Report. This will be in contrast to the US where the economy is perceived to be in a condition strong enough to withstand similar changes.” Berry adds.