Yields on short-to-medium dated Treasures subsequently rose to one-month highs with speculation inevitably turning to a rate rise next month, but could it be that investors are being complacent about their future direction?
The consensus view it appears is that record-low bond yields will doubtlessly begin to rise, sooner rather than later, and it is this opinion that has arguably held sway since 2009.
“The received opinion since the financial crisis has been virtually unanimous in the expectation that markets are surely on the cusp of the great fixed-income selloff, and that a retracement in government bond yields is around the corner,” says Nick Gartside, international chief investment officer, fixed income, at JP Morgan Asset Management.
However, as Gartside points out, government bond yields are a reflection of the underlying economic environment, which in the US, as in the UK, is far from certain.
Since 1984, when 10-year Treasuries peaked at 14%, yields have actually fallen relentlessly, hitting a low of 1.38% in the summer of 2012, before stabilising at current levels of around 2%.
Yes, when Bruce ‘The Boss’ Springsteen was singing about being born in the USA, the Ronald Reagan-led economy was in a period of robust recovery following the 1980-82 recession.