Worst bond crash in over 70 years to come – Bloomberg – RT Business News
Aggressive central bank interest rate hikes could trigger a strong sell-off, strategists warn
Global government bonds are on course for their worst performance since 1949 as losses mount against aggressive central banks, Bloomberg reported over the weekend citing Bank of America projections.
According to the report, the escalating losses reflect how far the US Federal Reserve and other central banks have moved away from the monetary policies of the Covid pandemic, when they kept rates near zero to keep their economies going. The reversal hit everything from stock prices to oil as investors brace for an economic slowdown.
On Friday, UK five-year bonds fell the most since 1992 after the government rolled out a massive tax cut plan. Two-year U.S. Treasuries are in the midst of the longest losing streak since at least 1976, falling for 12 straight days.
“Bottom line, all those years of central bank interest rate suppression – poof, over,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told the outlet. “These bonds are trading like emerging market bonds, and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate,” he explained.
The Fed raised its key interest rate range to 3.25% on Wednesday, its third consecutive hike of 75 basis points, suggesting further increases beyond 4.5%.
“With another Fed rate hike coming and quantitative tightening, plus the possibility of more government debt issuance down the road amid fewer Treasury buyers, it all just means higher rates. students », managing director of Mischler Financial Glen Capelo said, adding: « The 10-year yield will definitely approach 4%. »
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The Dow plunges to its lowest level in nearly two years
According to Bloomberg, over the coming week, the market could face further volatility following the release of inflation data and public speeches from Fed officials. In addition, the sale of new two-, five- and seven-year Treasuries will likely boost trading volatility in these benchmarks, he reports.
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