Global fixed income markets supported by sell-off in risky assets

Sell-off in risky assets prompted by China crisis has been a supportive factor for global fixed income markets. However, the impact on global government bond markets has been smaller than anticipated.

Eroding Chinese currency reserves together with sovereign wealth funds from oil countries is probably one of the reasons behind selling of bonds, resulting in the destruction of an otherwise very 'bond-friendly' environment.

"We stick to our view that the Fed will hike three times in 2016, not least as the labor market continues to tighten, and we expect US yields to start trending higher again, most significantly at the shorter end of the curve. We continue to expect a certain flattening of the curve 2Y10Y and 5Y10Y. The higher US yields are also the reason we see marginally higher 10Y European yields on a 6M and 12M horizon." said Danske Bank in a report