Developed market yields have begun to move higher

Sources: Bloomberg and Wells Fargo Investment Institute, as of September 30, 2022. For illustrative purposes only. Yields represent past performance and fluctuate with market conditions. Current yields may be higher or lower than those quoted above. Past performance is no guarantee of future results. Bonds are subject to interest rate, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. Although Treasuries are considered free from credit risk they are subject to other types of risks. These risks include interest rate risk, which may cause the underlying value of the bond to fluctuate. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.

Key Takeaways

  • 10-year German bund yields led eurozone yields higher in the third quarter as fears of recession did not prevent the European Central Bank from ending the zero-rate policy. 10-year U.K. Gilt yields surged above 3% as the pound sagged and politics drifted. Only Japanese Government Bond yields remained pinned near zero.
  • U.S. bond yields have climbed, propelled by elevated inflation levels.
  • We still expect yields to climb further into 2023, but consolidation in yields may occur at times.