The continuing saga between Greece and its creditors about whether or not it can, or indeed, should remain within the eurozone, has been a source of tension and concern for markets for some time.
Interest in the debate has ebbed and flowed depending on how close the various parties are to the can they have been kicking down an ever-shorter road since 2011.
The second issue is the looming expectation that the US will raise interest rates for the first time since 2009.
For Dunham, a US rate hike will have more impact in the long term because, he says, a lot of work has been done in the past two years to ring-fence broader markets from the impact of a Greek exit.
However, it is important to note that the longer-term impact of a change in US rates policy centres around not just the timing of the first hike but also how quickly rates rise from that point.
As Jim Leaviss, head of retail fixed income at M&G points out, the US has been itching to raise rates for some time now after enduring six years of close-to-zero levels.
This is because, he says, it would once again provide it with the luxury of having both a brake and an accelerator when setting policy.
In the firm’s second-half outlook for bond markets, he says: “A number of developments over recent months – namely the rally in equities, the growth in the sub-prime auto loans market and the return, more generally, of structured credit – worryingly resemble the period 2003-07, during which the Fed kept rates too low.”
Based on this, and a number of bullish economic indicators in the US, including some early signs of wage growth, Leaviss believes a rate hike should soon become a reality.
But, he adds: “Yellen and the Fed remember the lessons of the Great Depression well – remove stimulus too soon, and a rapid descent back into recession could be on the cards.”
As a result, the gamble for the Fed, Leaviss says, is that it will be easier to fight inflation by hiking rates than combating deflation in an already zero-bound world.
Sullivan is also worried about missteps, pointing out that bond yields have been manipulated too low.
He says: “Central banks will not be able to control market behaviour forever and, in the absence of earnings growth and significant pick-up in the health of the consumer, the chances of a mismatch are greatly increased – worryingly so.”
Out with the old
Exacerbating the worries around policy miss-steps, and the over-compression of yields, are the technical changes seen within the fixed-income markets since the global financial crisis that have left it short on liquidity.
While the buy-side has continued to grow, the banks that used to play the role of market-maker have stepped back and, given increased regulatory pressure, the appetite to run large credit desks has dried up.
This has left a much smaller conduit through which buyers and sellers can talk to each other, which means that patience has become a more important trait.
