Investors are backtracking on reflation bets, with the bond rally extending as central banks signal continued support and stocks falling as Covid-19 variants threatened reopening prospects.
This week’s aggressive repricing in U.S. Treasuries is going global, with long-end borrowing costs from Germany to the U.K. sliding as traders brace for central banks to quell fears over rising inflation.
It isn’t hard these days to find investors trumpeting the demise of the decades-long bull run in Treasuries.
The unprecedented $9 trillion rescue mission by central banks to haul the world economy from its coronavirus recession is being tested as rising bond yields and inflation bets threaten their ability to keep borrowing costs down.
Cast a gaze across global bond markets and it’s a sea of calm. Yields are close to record lows, volatility is nowhere to be seen and central banks are still ploughing trillions of dollars into the economy to help foster a recovery.
It was a dinner conversation with former Federal Reserve Chairman Ben Bernanke in early 2020 that convinced Cesar Perez Ruiz that the golden age of bond investing was over.
In Europe, investors like Alessandro Tentori are starting to say their goodbyes to the region’s bond market, worried that soon there may not be any place left for them.