Inflation Fuels Bond Selloff

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.

Uzair Khalil

Wall Street Journal

Advertisements
This entry was posted in Bonds, Inflation, Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s