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What's causing the bond market turmoil?

Tuesday, May 12, 2015 - 01:43

A bond sell-off is impacting global stock markets and adding to investor anxiety over the stability of Greece. With bond yields edging higher, Katie Gregory looks at what's causing this latest volatility.

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Share markets across the world are recoiling - as a government bond sell-off weighs heavily on stocks and adds to investor anxiety in Europe. The benchmark - 10 year US treasury yields hit their highest level this year - German 10 year yields are up 8 basis points. So what's prompted the instability? Carsten Brzeski is from ING. (SOUNDBITE) (English) ING, SENIOR ECONOMIST, CARSTEN BRZESKI, SAYING: "Right now, I think it's uncertainty about the future path of central banks. Especially the U.S., I think this is the orientation markets are looking for. When will we see the first Fed rate hike? And if it comes, how many will follow, how many rate hikes will follow." Higher expectations for inflation, a recent rise in oil prices... and uncertainty over Greece's finances are also adding to this rollercoaster ride. Less than a month ago - German 10-year yields hit a record low, driven down by the European Central Bank's bond-purchase scheme. (SOUNDBITE) (English) ING, SENIOR ECONOMIST, CARSTEN BRZESKI, SAYING: "I think that the latest sell-off actually shows that investors have become a bit more confident ... now investors have realised, that actually a yield on german bunds is too low, so we've seen this shift, a bit of air out of the bubble on the bond market. 10.03.34 For the euro zone there is a plus to the sell off - the number of government bonds with a negative yield has shrunk. That means richer pickings for the ECB which can't buy bonds too far below zero. Some say the bank's QE programme sparked the sell off in the first place - but just over two months in - it's being heralded as a success.

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What's causing the bond market turmoil?

Tuesday, May 12, 2015 - 01:43