Bond markets left smarting from worst rout in years as reflation goes global

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From the United States to Germany and Australia, government borrowing costs on Friday were set to end February with their biggest monthly rises in years as expectations for a post-pandemic ignition of inflation gained a life of their own.

FILE PHOTO: A broker looks at financial information on computer screens on the IG Index the trading floor in London, Britain February 6, 2018. REUTERS/Simon Dawson

Even after a Friday respite from this week’s brutal drubbing, Australia’s 10-year yield is up 70 basis points in February and New Zealand’s 10-year yield is up almost 77 bps. “Given how expensive bonds have been, meaning yields have been depressed, it was expected that when the selloff came it would move at great speed,” said Seema Shah, chief strategist at Principal Global Investors.

U.S. 10-year bond yields, up more than 35 bps this month and near one-year highs above 1.45%, are set for their biggest monthly jump since November 2016. Japan, which targets long-dated bond yields at around 0%, has seen 10-year yields rise almost 10 bps this month to 0.15%. That puts it on track for the biggest monthly gain since March 2020, the peak of the COVID-19-induced market turmoil.

 

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