Gilt Yields Fall as Equities Prove Unpredictable

Market volatility is not just the reserve of equities, as US and UK 10-year government bond yields have proven. What next for government and corporate bonds in the US and UK?

Andy Brunner 10 February, 2016 | 10:53AM

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US and UK 10-year government yields ended December fairly close to their highest levels since the summer peaks yet, but by the end of January, they had collapsed along with bunds to their lowest since April.

These dramatic moves, with yields cascading 30 to 40 basis points in the US, UK and Germany, initially began with another risk-off phase as equity markets tumbled. The more recent declines, however, coincided with a broad recovery in equity markets, reflecting central bank commentary and action with financial markets interpreting a delay to US rate rises, a further extension of quantitative easing by the European Central Bank, further easing in Japan, while expectations of UK rates were pushed out into 2017.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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