Bank Of England Blog Warns Of Devastating Bond Market Rout, “Worse Than 1994 Massacre”
by Tyler Durden
ZeroHedge.com
Jan 4, 2017
First it was Goldman Sachs, which accurately warned last summer that a sharp spike in interest rates would lead to trillions in bond market losses, as observed over the past two months after the Trump election. Then it was Ray Dalio’s turn to warn NY Fed staffers that “it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash.” Now, it’s the turn of the Bank of England, which writes in its blog, Bank Underground, that once the latest bond market bubble bursts, “it leave investors worse off than the 1994 ‘bond massacre’,” when global bonds suffered the biggest annual loss on record.
The blog post author, Paul Schmelzing, a PhD candidate at Harvard University and a visiting scholar at the Bank of England, has little cheer for bond bulls, and writes that “as rates reached their lowest level ever in 2016, investors rather worried about the “biggest bond market bubble in history” coming to a violent end. The sharp sell-off in global bonds following the US election seems to confirm their fears. Looking back over eight centuries of data, I find that the 2016 bull market was indeed one of the largest ever recorded. History suggests this reversal will be driven by inflation fundamentals, and leave investors worse off than the 1994 “bond massacre”.
The Rest…HERE
