Hot money set to push down US bond yield

A recent flood of hot money into the United States bond market will provide more room for the yield of 30-year US Treasury Bonds to head further downwards, a top HSBC Markets official says.

HSBC Markets head Stuart Gulliver said the yield would probably decline further to 6.6 per cent rather than the target range of 6.75 to 7.25 per cent he set earlier on 30-year US Treasury Bonds.

The forecast was based on the series of economic figures released recently which suggested inflationary pressure in the US was easing, and a recent flood of Japanese money into the US bond market.

Mr Gulliver said the inflow of Japanese funds into the bond market appeared to be on the increase, especially after the Japanese companies finished their fiscal half year in late September.

This resulted in a bond price rally and a bond yield decline.

A decline in bond yields, an indicator of future movement in interest rates, suggests that the US Federal Reserve is less likely to raise interest rates in the near future.