Back
17 May 2015
Is the bond sell-off over? - Westpac
FXStreet (Bali) - Richard Franulovich, FX Strategist at Westpac, notes that global bond markets appear to be stabilising, with historical analogs suggesting that the bund-led bond market sell-off may not be complete.
Key Quotes
"Historical analogs suggest that the bund-led bond market sell-off may not be complete."
"In 2003 JGB yields rose about 120bp in the space of barely three months."
"In 2013 US 10yr yields rose about 110bp in three months amid the then "taper tantrum". Yields continued to march higher for a full four months taking them a good 140bp higher. See slide below."
"The background conditions ahead of these past bond market declines have parallels with today's sell-off: monetary policy was exceptionally accommodative and bond market volatility was low to non-existent."
"Bond yields had been falling steadily in the weeks leading up to the meltdown. JGBs yields had fallen to historic lows just ahead of their sharp 2003 sell-off while US yields were very close to generational lows going into the 2013 taper tantrum"
"In both cases the subsequent rise in yields played out mostly over about 60 trading days and yields rose a good 100-120 basis points."
"Against these basic metrics the rise in bund yields appears to have further to run. Historical analogs suggest that we may be about half-way there both in terms of magnitude and duration."
Key Quotes
"Historical analogs suggest that the bund-led bond market sell-off may not be complete."
"In 2003 JGB yields rose about 120bp in the space of barely three months."
"In 2013 US 10yr yields rose about 110bp in three months amid the then "taper tantrum". Yields continued to march higher for a full four months taking them a good 140bp higher. See slide below."
"The background conditions ahead of these past bond market declines have parallels with today's sell-off: monetary policy was exceptionally accommodative and bond market volatility was low to non-existent."
"Bond yields had been falling steadily in the weeks leading up to the meltdown. JGBs yields had fallen to historic lows just ahead of their sharp 2003 sell-off while US yields were very close to generational lows going into the 2013 taper tantrum"
"In both cases the subsequent rise in yields played out mostly over about 60 trading days and yields rose a good 100-120 basis points."
"Against these basic metrics the rise in bund yields appears to have further to run. Historical analogs suggest that we may be about half-way there both in terms of magnitude and duration."