By Garfield Reynolds, Bloomberg Markets Live reporter and strategist Surging commodity prices are threatening to bring inflation back through a door that investors thought central banks had slammed shut. That’s bringing yields higher, but the structural boost to fiscal spending that is helping drive demand for raw materials threatens to create a vicious circle for bond investors assuming that 2023 marked the start of a fresh bull run.
Onshoring, the green transition and increased defense spending all require more raw materials, and they are all also price-inelastic to at least some degree. China’s demand for such things has held up surprisingly well even as its imploding real estate sector hamstrings economic growth — but then it is engaged in a truly massive effort to switch to renewables for power generation.