Volatility spikes as bond sell-off continues

Tuesday, May 12, 2015

Global risk assets fell sharply during today’s trading session as investor attention remained firmly locked on the impasse between Greece and its creditors. Borrowing costs around the world increased while eurozone share prices plummeted as contagion swept across the globe with Greek talks dominating the week’s headlines. Equity markets across the eurozone saw heavy losses today as marginal progress to tackle Greece’s mountain of debt failed to assuage market participants. Despite Athens ordering the repayment of €750m to the IMF the constant delays and lack of cohesion has rattled investors.

US ten year treasury yields climbed higher today, reaching a six month high of 2.3639% as it built on yesterday’s 13 basis point increase. The unsettled mood among European investors prompted a fresh retreat from long dated government bonds as rising oil prices fuelled inflation expectations and pushed investors to retreat out of fixed income in search of higher yields.

German ten year government bond yields mimicked the rally in US yields, rising 18 basis points since Monday and attempting to converge on a four and a half month high towards 0.777%. Germany’s 10 year bond yields have increased a massive 69 basis points since bottoming out in April as investors sought out better inflation protection and on any further significant gains in the crude oil market we could see yields climb higher as the selloff in bonds continues.

 US 10 year government bond yields spike higher on sell-off

USGG10YR Index US Generic Govt 2015 05 12 13 16 36

10 year German bond yields rally towards four and a half month high

GDBR10 Index Germany Generic Go 2015 05 12 15 04 25


Topics: IMF, Yields
More from: Kash Kamal