An overview of the bond bloodbath

US 10s are taking a hit but it’s nowhere near the pain in the periphery and the UK.

  • UK 10-year yields up 17 bps to 2.57% — highest since 2011
  • France 10-year yields up 14 bps — highest since July 2012
  • Italy 10s up 21 bps — highest since March
  • Spain 10s up 21bps — highest since March
  • Portugal 10s up 35 bps — highest since January
  • Canada 10s up 9 bps — highest since 2011

It’s an absolute rout around the globe. The question is: where is the money going? The short end of the curve is also selling off and so are stocks. At some point that money needs to find a home.

You can also be sure that central banks in struggling economies — ahem the UK — will not be pleased to see borrowing costs rising. This increases the chance of Carney making dovish moves at the BOE.

Author: Adam Button

Adam Button is the editor of ForexLive™. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes deeply in the value of knowing every tidbit of news. He has a background in journalism and was formerly the head of the markets team at the Canadian Economic Press. He is a graduate of Ryerson University and completed Level 1 of the CFA program. Adam lives in Montreal, follow him on Twitter: @FX_Button.

11 Comments

  1. GBP/CAD (pr 1.6225) looks interesting closing in on the top of a range 1.6350 from mid 2010…… if Carney gets trigger happy

  2. they are going into….wait for it…..cash.

  3. And this is an indicator of going short on Cable….!!!!

  4. I’m with nico.

  5. The 3M bill auction just went off with the highest yield since April 8.

  6. I know it’s a silly thought but I believe in countries like Greece and Portugal, the money is under the mattress. Nowadays most of the people feel that is saffer than banks

  7. We’re not talking about the mom & pop investor here with 100K. It’s pension funds with $40 billion, you can’t put that in the mattress.

  8. Yes I know it can’t be Mom&Dad savings, but for example, in Portugal there are many funds created by the goverment and banks based on public debt, specially 10years, they’re called retirement and saving plans. Those plans used to have fiscal benefits like 4/5years ago, but now they’re gone. So with no suprise, the size of plans have decresead a lot due to withdraws from people. On the other hand, due to troika, taxes on stocks have increased so now it’s almost pointless to have stocks. I know it doesn’t explain all, but join everybody who had money there, from Portugal, Greece and other countries and you will notice that a big amount of money is out of the market.

  9. With shares, they can lend some of their holdings to short sellers for a fee (can you do that with bonds too?). Once the cash holding limit of the investment mandate has been used up, this is proably the only way for a long only fund manager to hide some of the losses. You could argue that it’s disingenuous to undermine the value of your porfolio, but it’s equally disingenuous to have a long only mandate in a single asset class. A win for traders at the expense of “investors” overall in that scenario. No complaints from me. Maybe the money finds a new home in selling this borowed stock, or alternatively it buys credit default swaps (sound familiar?).

  10. Add Australian bonds, +28bps, and that’s at close, so before the further slump in European/US Trading. Watch out given the large foreign ownership base… At this pace, the ECB needs to accelerate and be ready to buy bonds. They may have thought they’d get away with it, but they may be tested again…

  11. Oil is getting a nice bounce today. Seems to be some activity in interest rate swaps too.

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