Government bonds are widely expected to have a rough ride in 2010 as central banks tighten monetary policy, fiscal strains continue to build and upward pressure on headline inflation fails to subside. Some, if not all, of these concerns may continue to weigh on markets to differing degrees for a while. But over time government bonds should do better than many expect. We think yields will generally drop back sharply in the second half of the year, if not before.
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