Su-Lin Ong, chief economist at Royal Bank of Canada in Sydney, said Tuesday's rise in U.S. and Australian Treasury yields may reflect both concerns about pricing in aggressive rate cuts and the possibility that the Red Sea conflict could refuel supply chain issues. Ong said higher yields could reflect the spillover effect of some hawkish comments from the Central Bank last night, with eurozone yields moving higher and the yield curve flattening. Markets have largely priced in rate cuts from the G7 excluding Japan, especially for the US, so there is some risk of disappointment. The situation in the Red Sea may also be at play, she said. Ong added that ongoing tensions could disrupt the supply chain, raising freight costs if ships need to avoid this route, which could increase price pressures.
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RBC: The rise in yields may reflect Central Bank rhetoric and concerns about the Red Sea
Su-Lin Ong, chief economist at Royal Bank of Canada in Sydney, said Tuesday's rise in U.S. and Australian Treasury yields may reflect both concerns about pricing in aggressive rate cuts and the possibility that the Red Sea conflict could refuel supply chain issues. Ong said higher yields could reflect the spillover effect of some hawkish comments from the Central Bank last night, with eurozone yields moving higher and the yield curve flattening. Markets have largely priced in rate cuts from the G7 excluding Japan, especially for the US, so there is some risk of disappointment. The situation in the Red Sea may also be at play, she said. Ong added that ongoing tensions could disrupt the supply chain, raising freight costs if ships need to avoid this route, which could increase price pressures.