Prepare for a bond rout

Markets have taken fright at the mere mention of the central banks unwinding quantitative easing. That doesn't bode well for bonds.

In 2009, Sir Mervyn King said that the process of unwinding quantitative easing (QE) central banks injecting printed money into the economy by buying bonds was "incredibly straightforward". In fact, says Sam Fleming in The Times, "it is proving to be a nightmare".

Markets "have been in tumult" ever since late last month, when US Federal Reserve chairman Ben Bernanke merely hinted that the Fed might slow down the pace of its asset buying in the not-too-distant future. If just a hint of tighter money causes this much fuss in today's liquidity-addicted markets, what will happen if he really does start turning off the taps?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.