The great bond sell-off is back and this time it's going global

Jessica Morris
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Global markets went into a tailspin today (Source: Getty)

Global markets went into a tailspin today as investors started selling off government bonds again.

US 10-year yields, the benchmark for global borrowing costs, hit their highest since early December. And German 10-year yields, the benchmark for Eurozone borrowing costs, rose 12 basis points to 0.71 per cent.

Because yields move inversely to prices, sharp rises show that investors are becoming increasingly cautious about lending to said governments.

And this also riled global markets. The FTSE 100 was trading down 1.6 per cent at 6916.14, the German Dax shed two per cent to 11440.27 while the French CAC was 1.4 per cent lower at 4959.21.

"It's a matter of concern for the market," global head of equities strategy at Exane BNP Paribas, said.

"When any particular asset class goes through periods of extreme volatility in a short space of time, people feel the pressure to take their risk exposure lower."

At present market mavens are struggling to pinpoint a single cause, nevertheless they blame rising inflation expectations, higher oil prices, as well as a lack of liquidity making it harder for investors to exit the market.

Elsewhere, emerging market bond yields were also higher, as the Indonesian 10-year rose 14.4 basis points to 4.056 per cent and the South Korean ten year rose 13.6 basis points to 2.599 per cent.

"The big story is the rise in bond yields, in developed and in emerging markets. While yields are still low in historical terms, it looks like the era of cheap cash for emerging markets is over," Neil Shearing, head of EM research at Capital Economics, said.

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