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A Virtuous Circle Will Fuel Recovery: Strategist

An economic recovery will continue through next year and bond yields will rise in the medium term, Thomas Kaegi, head of macroeconomic research at UBS Wealth Management in the Asia Pacific region, said Monday.

The main reasons a recovery is likely are the same ones that prompted the recent rally: fiscal and monetary stimulus and restocking of inventories, Kaegi told CNBC's “Squawk Box Asia.”

“We’re going to be entering something like a virtuous circle,” with inventory restocking creating further demand, he said.

The European Central Bank is unlikely to raise rates until the second half of 2010, also boosting the recovery, he said.

In addition, while government bond yields remain low now, that may due to quantitative easing, and eventually inflation worries will pick up and that will be a burden on yields, Kaegi said.

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