Developed market bond yields should move markedly higher through the rest of this summer, but then fall sharply going into 2009, says Daniel Pfaendler, head of G10 economics & strategy at Dresdner Kleinwort.

He believes the oil price shock and the unwinding of asset bubbles, over-leverage and economic imbalances in general should keep growth significantly below trend and real yields depressed for a protracted period of time.