What remains is a powerful authority on the bond market – the ECB.
Image: Maximilian von Lachner
Banking crisis here, looming defaults there: The bond market has seen stormy days and has not run aground. But the waters remain dangerous and the central banks remain in control.
This year the bond market was as turbulent as it has seldom been (except perhaps in the previous year). Prices had fallen significantly in February and yields had risen with them. For example, the yield on the two-year US government bond hit 5.07 percent on March 8 after starting February a full percentage point lower. The yield on the ten-year federal bond rose somewhat less spectacularly from 2.07 to 2.74 percent. Then in March things went downhill. The (partial) banking crisis awoke the financial crisis trauma and the yields on the same bonds fell to 3.77 and 2.12 percent.
Martin Hock
Editor in Business.
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In the meantime, the greatest shock seems to be over and yields have risen again somewhat, to 4.06 and 2.29 percent most recently. If you compare these values with those from the beginning of February, you are tempted to say: Nothing but expenses (which may even be literally true for some traders). But that’s not entirely the case. If the events were not reflected in the value of the portfolio, they added an experience and a few emotions such as fear and subsequent relief.