Developed country bond prices tumbled this past Thursday amid newfound worries over inflation rattling global markets. Yields skyrocketed across the globe to levels not seen since the Brexit vote. U.S 10 year treasuries surged to 1.843% Thursday, the highest the yield has been since June 1. The German bund’s yield rose to 0.172%, while the U.K 10 year gilt increased .087 percentage points to 1.246%.
Low commodity prices, meager wages and lackluster economic growth pushed inflation fears to a minimum over the past several years. Investors piled into assets such as long term bonds and stable, dividend paying stocks. These securities perform well in times of low inflation. With inflation expectations now on the rise, these assets are getting hit. From the beginning of the year to September, consumer inflation was 1.5% in the U.S. and 0.4% in the Eurozone. Chinese factory prices rose for the first time in over 4 years last month. Oil and other commodities are bouncing back after hitting multiyear lows earlier in the year. These factors, along with U.S wage increases, are fueling inflation expectations.