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Bond “bubble” likely to deflate, but not burst

Government bonds have rallied further in developed economies in recent weeks, fuelling speculation that they are in a bubble which will burst at some point. We disagree. Admittedly, we think that the rally has gone a bit too far. But we doubt that bond markets will crash anytime soon. Indeed, we forecast that most 10-year yields will end 2019 only a bit higher than their levels now.

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