Investors may steepen yield curve on fiscal fears

BOND markets remain focused on budget concerns in the United States, euro zone and Japan, meaning the recent pullback in ultra-long sovereign yields may prove short-lived, potentially reigniting interest in this year’s popular curve steepening trade.

Investors have been quick to react to governments that up their spending, or are not seen to be doing enough to rein in their finances, by selling their long-term bonds, pushing borrowing costs for some countries to multi-decade highs.