Bond Investors Hit Hard As UST Yields Increase

Bond investors have been hit hard this month as the US recovers and people get ready for the end of qualitative easing; the effects have proven to be farther reaching than many expected as beta between US Treasury bonds (UST) and European government bonds increase. Emerging markets are also taking a big hit as a result, explains Societe Generale analysts Vincent Chaigneau, Mary-Beth Fisher, and Wee-Khoon Chong in a recent report.

Correlation between US bonds and European bonds

USTs were expected to be sold off as the US economy improves, but the strong correlation between USTs and European bonds has taken many people by surprise — 10 year gilt bond yields went up 49 bp versus 43...