Government bond markets across the globe faced heavy selling pressure this week, driven by a sharp resurgence in energy prices that has revived concerns over accelerating inflation.
The selloff has inflicted significant losses on investors who had positioned for the worst of the year’s market volatility to be behind them, effectively resetting the risk premium in fixed-income assets.
68% on Thursday. This move reflects a broad-based retreat from safe-haven assets as traders recalibrate their expectations for monetary policy.
The average yield on the Bloomberg Global Treasury Index, which tracks government bonds of investment-grade countries, surged to 3.68% on Thursday.
This move reflects a broad-based retreat from safe-haven assets as traders recalibrate their expectations for monetary policy.
The spike in yields indicates that markets are now pricing in a higher-for-longer interest rate environment, or potentially even a pause in easing cycles, as the inflationary impact of higher oil prices becomes more apparent.
The energy-driven repricing poses a direct challenge to central bankers, who are now facing renewed credibility tests.