Close to 13 years since four of the world’s major central banks employed unconventional easing, we have seen the lowest interest rates and the most expensive bonds in history. At least, until 2021. The reversal of last year’s deflation panic lows in long-term yields has delivered the worst first quarter for 30-year Treasuries since 1919, with a total loss of 16%. While shorter-duration bonds have remained well-anchored by the tractor pull of quantitative easing, the sell-off in longer maturities only returned yields to where they stood before the pandemic. The size of the bounce and rapidly rising inflation expectations have added to evidence of an underlying sea change. In this special edition of Wealth Manager, we take a look at bonds at a critical juncture, ask where yields will go from here, and examine how they got to where we find ourselves today. The graphs below highlight the unprecedented level of bond buying since the financial crisis, as central banks have sought to stave off recession.
