Global bonds yields continued to rise and bonds selloff deepened as investors are expecting Central banks’ simulation come to an end. The global bonds market is experiencing its worst month since September 2014. On Wednesday, British 10-year government bond yields were up 11 basis points to 1.27 percent, closing to level before Brexit. The yield on German 10-year bunds was 0.17, the highest level in five months. According to Bloomberg’s data, yield of U.S. 10-year treasury note rose 7 basis points to 1.86 percent in New York.
The global selloff came after United Kingdom announced a 0.5 percent gain in GDP that topped analysts’ estimates. The strength in economy lowered the change of more simulations though the end of 2017.
“It’s a fairly slow walk away from ultra-accommodative policy,” said John Wraith, head of U.K. rates strategy at UBS Group AG in London. “The problem that has occurred in the past is that whenever the market starts to price in tighter policy or higher yields, it starts to seep through in a way that slows things down without them ever getting to the point of tightening policy.”
Expectation that the Federal Reserve will boost borrowing costs in December deepened the bonds selloff in U.S. Investors are more cautious on the bonds market before election in November and Fed meeting in December.
“The whole idea is that central banks may not necessarily rush to add a lot more stimulus in the near term is what’s driving yields higher and yield curves steeper,” Rjavinksi said. “It depends on a number of things. One is the data, and two is the the U.S. election.”