The trend of interest rates globally, with a particular focus on the United States, is closely tied to the policies of the Federal Reserve. According to Martin Van Vliet, Global Macro Strategist at Robeco, the recent market volatility reflects evolving expectations on Fed funds. Since mid-September, the implied rate for the end of 2025 has risen by about 100 basis points, pushing US Treasury yields at the 5-year mark up by 60 basis points. This phenomenon has not occurred in isolation but is part of a broader framework influencing global bond markets.
Market divergences: US Treasuries and German Bunds
While US Treasuries have experienced a significant rise in yields, German Bunds and Euro swaps have shown a divergence from the United States. This scenario has allowed European markets to avoid the most pronounced effects of the recent US monetary tightening. However, the macroeconomic outlook suggests that this situation may not be sustainable in the long term.
The role of the ECB and prospects for the European market
Robeco‘s forecasts indicate that the ECB is unlikely to deviate from its gradual rate cut path, 25 basis points per meeting, at least until June and beyond. This context makes it difficult to be strongly optimistic about German Bunds, although there is a higher probability that the ECB will lower the rate below 2% rather than keeping it significantly above this threshold. Such a move would offer a positive risk inclination, reducing the probability of a prolonged sell-off of Bunds.
Yield curve strategies and future impacts
Martin Van Vliet‘s analysis highlights how, globally, yield curves continue to favor steepener strategies, anticipating further monetary easing by central banks. This process will be accompanied by an increase in the term premium, driven by the reduction of central bank balance sheets, fiscal uncertainties, and inflation trends, factors that will weigh more significantly than in the 2010-2020 decade.
The evolution of global interest rates will continue to be a key theme for investors. What are your forecasts on how the Fed and the ECB will handle the coming months? Share your thoughts in the comments below!
