Flash PMIs Point to Improving Global Economy... and Higher Bond Yields

As we head into a very busy data week with the October round of PMI data due out, it's worth reflecting on the flash readings that were released last week for the US, Europe, and Japan. A composite of these 3 major developed economies shows a sharp improvement in October after bottoming in May this year. The gains in October were broad-based across the 3 regions and were better than expected. Thus it's easy to see why bonds are selling off. Indeed, as the the chart below shows, bond yields could be set to move even higher. So it's a case of good news on the economy, but bad news for bonds.