Making sense of rates volatility and the sell-off in bond markets
By Chris Forgan 21
st April 2021 12:52 pm
In recent weeks, the US Treasury (UST) yield curve has steepened notably, causing volatility in bond markets. This began following confirmation of an increased fiscal stimulus package in the US, driving 10-year USTs up to their highest levels since the beginning of the pandemic.
The stimulatory impulse has led to stronger growth expectations, meaning yields are rising in response to fears of an overheating economy, and the consequences this has for bondholders.
Beyond causing a rally in US equities, fiscal stimulus has increased investors’ inflation expectations. As inflation is a key risk to the value of bonds over time, many have turned away from high duration debt instruments (those with longer maturities), driving prices down and yields higher. But what does this mean for investors? How should we think about these developments in the co
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