Breaking Down the Global Bond Selloff

Summary

Ira Jersey of Bloomberg Intelligence explains the global long-dated bond selloff, citing weak fiscal positions in the G3-plus and solid growth that lets central banks keep rates higher. He expects yields to keep grinding higher with no near-term correction, especially in the US as foreign investors find alternatives such as hedged Japanese government bonds. Japan's 30-year yield back at 4% reflects heavy supply and BOJ selling, keeping investors underweight JGBs.

• Global long-dated bond yields are pushing toward multidecade highs.
• Ira Jersey cites poor fiscal positions in Germany, UK, Japan and the US as a key driver.
• Decent global growth is allowing central banks to keep raising or consider raising rates.
• He sees no corrective action and expects yields to leak higher nearly everywhere.
• US long-dated Treasuries face reduced foreign demand as hedged JGBs become competitive.
• Japan's 30-year JGB yield is back at 4% after about two decades near 2%.
• BOJ selling and heavy Japanese government issuance add pressure to JGBs.
• Investors who avoided negative-yielding debt may rotate into non-US bonds, reducing US and UK demand.