Weighing Up Risk
It's a view that analysts at Barclays shared, adding that concerns about U.S. fiscal woes were a reason not to expect government bond yields to rise too sharply, as some analysts expect.
Yields on benchmark Treasurys have added about 20 basis points so far this month as investors shift out of safe-haven debt and into riskier assets amid a backdrop of brighter economic data in the U.S. and China, the world's two biggest economies, and fading concerns about the euro zone debt crisis.
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"Risky assets have staged an impressive rally this year on the back of positive global sentiment with risk premia compressing sharply," the Barclays analysts said in a note on Monday. "By late February, however, we expect rates (yields) to start grinding lower… in part on a more realistic assessment of the fiscal drag likely to prevail in the latter half of the year and beyond."
According to Barclays, because of little appetite by U.S. lawmakers to delay spending cuts further, U.S. economic growth forecasts for the second half of the year are likely to be revised lower.
"We also believe that the market is underestimating the extent of the fiscal drag likely to prevail over the next few years," Barclays said.
Pull Back, Just That?
For some analysts global equity markets, battered by the global financial crisis,have now turned a corner and any disruption that worries about the U.S. budget position bring are likely to be temporary.
"It is probably time for a pull back, but I think we are at the start of a significant long-term move," ABN Amro chief economist Han De Jong said.
Steve Brice, chief investment strategist at Standard Chartered Wealth Management Group in Singapore said the key for investors was not to miss the boat as risk appetite returns to global asset markets.
"We do have the debt ceiling talks coming up and if you get any weakness from that, then you should take it as an opportunity (to get back into stocks)," he told CNBC. "If we get through the debt ceiling talks, maybe we could see some more confidence coming through from the U.S. corporate sector," he added.
- By CNBC's Dhara Ranasinghe; Follow her on Twitter: @DharaCNBC