Bond Markets Should Brace for Tighter Central Bank Squeeze

As the British and Australian central banks prepare to crank up their moneyprinting presses and the U.S. election outcome ups the pressure for more Federal Reserve action, one thing is clear alreadyscarce government bonds will get harder to find.

This week, the Bank of England increased its bondbuying by a biggerthanexpected 150 billion pounds 195 billion, while the Reserve Bank of Australia said it would buy 100 billion 70.4 billion in debt over the next six months.

The aggressive moves build on this years accelerated stimulus from central banks, which are battling the COVID19 shock and uncertainties ranging from Brexit to doubts over the scale of government spending.

Now, amid fading prospects of a Democrat U.S. election sweep and a government spending splurge, some economists speculate the Fed might have to step up purchases of longdated Treasuries to keep stimulus flowing.

And the takeaway is that even as governments borrow more, the bond freefloat whats available to investors will be squeezed further.

Gary Kirk, portfolio manager at TwentyFour Asset Management, said years of ultraloose monetary policy are a certainty, even before the Fed announcement this year that even an inflation target overshoot would not trigger immediate action.

This, combined with asset purchases running for at least the next year, in our view means we can expect the demand for fixed income from sovereigns through to speculativegrade credit to outstrip supply, resulting in yield…

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