Have bond yields finally hit their lows?

Britain, America and Germany have been borrowing at the cheapest rates in decades. But is all that about to change?

The end of the multi-decade government-bond bull market in the Western world "has been proclaimed more times than supposed sightings of Elvis", says Richard Milne in the FT. Yet over the past few years, bond yields have ground ever lower (reflecting rising prices, as these move inversely to yields). Germany, America and Britain have all been able to borrow ten-year money at historically rock-bottom interest rates of under 2% in recent years.

However, many observers now think that the long-term trend has finally turned. Rapid recent upticks in yields mean that "a long-term bear market [in bonds] has commenced", says UBS. Last September's US ten-year Treasury low of 1.72% will come to be seen as the turning point, according to analysts at the Swiss investment bank. They also warn just how quickly bond yields can rise; in 1994, yields jumped from 5% to 8% in a year as prices tanked.

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