In a note, strategists at J.P. Morgan said that global bond yields will likely fall slightly in 2023 as demand and supply will improve by $1 trillion.
Bond demand will fall by $700 billion compared to 2022, according to the note issued on Thursday by J.P. Morgan strategists, Nikolaos Panigirtzoglou.
According to the Wall Street bank, a $1 trillion improvement in demand supply balance would result in downward pressure on global aggregation yields of around 40 basis points, based on the historical relationship between annual changes in excess supply and the Global Aggregate bond index yield.
J.P. Morgan said that while major central banks trimming their balance sheets in 2022 was the biggest contributor to deterioration in bond demand, sell-offs by commercial banks and retail investors were much higher than estimates.
This year was one of the worst for bonds in history. The 23% drop in annual returns of the 10 year U.S. Treasury losses through last month was the worst since the turbulent infancy of 1788, according to Bank of America.