Scary Times

The recent slide in Sovereign bond yields, led by Germany and now striking as far afield as Asia and the US, has created agitation amongst investors’, including the “King of Bonds,” Bill Gross, the former head of PIMCO and now providing his excellent services at Janus Capital. During a Bloomberg interview earlier this week, Gross acknowledged the increased volatility and liquidity problems within the bond space, going on to say, “it scares the hell out of me.”

 Whilst I have commented on the surging bond yields of late, particularly in the context of reminding that, “it’s the market that decides on the interest rates that matter, not a central banker,” it’s been a while since commenting on the volatility of US Treasuries’. It was in fact, “On the Move Revisited,” penned in May 2014, where move relates to the Merrill Lynch volatility estimate of the 30-year US treasury, the US mortgage rate benchmark.

 Here it is updated:

5 June 15 Blog 1.

Volatility is indeed on the rise as is the 30-year yield, the latter of which has soared by 40% since the end of January this year and totally beyond the control of Ms Yellen and her Fed colleagues.

Returning to that Bloomberg interview, Bill also said, “I don’t think we’re in for a bear bond market just yet,” and perhaps he is correct.

However, a glance at the chart above suggests a move above 120 appears likely, dragging US interest rates above the 4.5% level, last seen in 2011.

The bond space is about to get a lot scarier yet and is that a growl that I hear?

 

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One response to this post.

  1. […] June of this year our missive, “scary times” touched on the increased volatility within the financial markets and gathering “liquidity […]

    Reply

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