The first months of the year have seen a forceful increase of government bond yields driven by higher inflation, exacerbated by the spike in energy and raw material prices following Russia’s invasion of Ukraine. In the US, expected real yields also climbed and are now close to zero.

This reflects the good business conditions in the country. In Europe, real yields are still deeply negative. Europe is economically more affected by the war in Ukraine. The Purchasing Managers’ Indices (PMI) for April, however, indicate that the effect is limited so far. It is too early for a final assessment as the war could drag on for a long time. 

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