Global government bonds hit by fresh wave of selling

Global government bonds hit by fresh wave of selling

The global government bond sell-off deepened on Wednesday, with the 10-year US Treasury yield jumping above 1.4 per cent for the first time since the start of the coronavirus crisis.

European government bonds were also caught-up in Wednesday's selling, sending yields on British, French, German and Italian bonds rising. The drop in prices is the latest leg of a broad shift away from government debt that has been driven by a more upbeat global economic outlook and rising concerns over inflation.

The 10-year Treasury yield rose as much as 0.09 percentage points on Wednesday to reach 1.4337 per cent, having started the year at around 0.9 per cent. Longer-term Treasuries faced more intense selling since they are more vulnerable to changes in inflation expectations.

The global bond market is suffering its worst start to a year since 2015 as investors grow increasingly confident that the rollout of Covid-19 vaccines will boost economic growth and fan serious inflationary pressures for the first time in decades.

"We may finally once again be on the road to reflation,“ said Ed Yardeni of Yardeni Research. "I'm seeing more and more signs of mounting inflationary pressures as a result of the unprecedented stimulus that fiscal and monetary policymakers are