Big Volatility Shakes Bond Investors
May 13, 2015 9:31 amVideo
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Editor’s note: You’ll find the text version of the story below the video.
The yields on U.S. Treasuries and European sovereign debt have risen sharply in a relative short time.
Bond prices trend inversely to yields — which means debt portfolios have suffered substantial losses.
From mid-April through May 6, yield on German 10-year bunds spiked 47 basis points. Yields on 10-year U.S. Treasuries jumped 29 basis points in just the past week.
Volatility in the bond market continued on May 7. In just a few hours, the yield on the 10-year bund jumped 21 basis points before pulling back. Bear in mind that sovereign bond yields rarely move more than a fraction of one percent in a day.
Long-term bonds have been hit particularly hard. The yield on 30-year U.S. Treasuries topped 3% for the first time this year.
German government debt is regarded as a benchmark for European assets.
Take a look at this chart of Euro-Bund futures from our May 6 Financial Forecast Short Term Update:
The April Elliott Wave Financial Forecast warned subscribers about the insanity that pervades the world’s bond markets. Take a look at this chart and commentary:
The risk of widespread defaults also lurks in the world’s credit markets.
Here’s what well-known hedge fund manager Stanley Drunkenmiller recently said:
All told, the world’s credit markets are on very unstable ground. Expect that ground to get even shakier in the months ahead.
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