The record-breaking global bond market rally since the start of this year has fizzled out as mounting signs of persistent inflation force investors to reverse their views on the likely future path of interest rate rises.Investors rushed into fixed income in the first few weeks of 2023 as they became increasingly expectant that the US Federal Reserve and other major central banks would soon end their aggressive campaign of monetary policy tightening.

A Bloomberg index tracking high-grade government and corporate bonds rose as much as 4 per cent last month, its best ever start to the year.

But that gain has now disappeared after a scorching US labour market report earlier this month kicked off a run of better than expected economic data on both sides of the Atlantic, upending expectations that the Fed and the European Central Bank were close to winning their battle with inflation.