Bond bubble hisses air

Events in the bond markets this week are a reminder of how overstretched bond prices are and how investors are unlikely to make money from them.

"This is a big, big moment," says Jeff Gundlach of DoubleLine Capital. "I think it's the beginning of something." That something, according to the "bond king", could well be the end of a trend that has lasted since the early 1980s: a bond bull market that has taken prices to record highs.

After an exceptionally calm August, markets have had a jolt. Government bond yields have jumped sharply as prices have slumped (yields and prices move in opposite directions), with the yields on the ten-year US Treasury and German Bund back to their pre-Brexit levels; Japanese bond prices have slid by almost 2.5% this quarter, and are heading for their worst quarterly showing since 2003. All this upheaval in bonds unnerved stockmarkets too. The S&P 500 had its worst day in three months last Friday, losing 2.45%.

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.