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Tags: bonds | treasury | bund | invest

This Is What's Happening Amid a Wild Week for World Bond Markets

Thursday, 04 June 2015 03:15 PM EDT

There have been some big swings in the global bond market this week.

Here's what's been moving — and what hasn't.

It all started with German government bonds. Yields on 10-year bunds, which move inversely to price, jumped as much as 51 basis points over the week to touch the highest in more than eight months on Thursday as investors reacted to signs of inflation in the eurozone. (One basis point is equal to one-hundredth of 1 percent, or 0.01 percent (0.0001).

Mario Draghi, President of the European Central Bank, helped fuel the sell-off by saying investors should "get used" to bond market volatility thanks to very low interest rates that can exacerbate price swings on the debt.

Yields on U.S. 10-year Treasurys followed suit, rising about 30 basis points to the highest since October. With the rout spreading, traders cancelled meetings and rushed back to the office to deal with the swings.

Jumping government bond yields impact other securities. Yields on the type of Fannie Mae mortgage bonds that guide U.S. home-loan rates jumped to the highest since October, up more than 60 basis points from their 2015 low in January.

Meanwhile, investment-grade corporate bonds felt the heat of the government selloff, with average yields rising 19 basis points to 2.568 percent, the highest since April 2014.

Bonds maturing in at least 10 years felt the brunt of the rout, with yields jumping 25 basis points during the week.

Short-dated corporate notes didn’t suffer so much, with yields rising 8 basis points over the course of the week.

High-yield was sheltered from the worst effects of the rout as average borrowing costs rose just 4 basis points to 5.772 percent, the highest since May 14.

Bonds are a bedrock of global financial markets. This week's sell-off has wiped out all of 2015's gains on the Bank of America Merrill Lynch Global Broad Market Index of bonds, which had been up 2.3 percent as recently as April.

That index alone includes bonds with a total face value of $41 trillion.


© Copyright 2024 Bloomberg News. All rights reserved.


InvestingAnalysis
There have been some big swings in the global bond market this week. Here's what's been moving - and what hasn't.It all started with German government bonds. Yields on 10-year bunds, which move inversely to price, jumped as much as 51 basis points over the week to touch...
bonds, treasury, bund, invest
339
2015-15-04
Thursday, 04 June 2015 03:15 PM
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