Institutional Analysis: Inflation expected to continue challenging the bond market.

Pictet Asset Management stated that inflation remains a challenge for the bond market, and the company is skeptical of the attractive yields offered by many sovereign bonds at the moment. The institution said in a report, "For example, the yield levels in the United States and Germany are reasonable as inflation risks increase, leading to a higher probability of monetary tightening and decreased liquidity." Overall, Pictet remains neutral on US government bonds and other major sovereign bonds. However, the institution believes that the outlook for emerging market local currency debt is much more optimistic, as this type of debt offers higher yields and is ranked as the most attractive fixed income asset class in Pictet Asset Management's model.