What’s Driving the Global Bond Selloff? Your Questions Answered

Bonds are selling off around the world and yields are climbing. We asked what you wanted to know about the sell-off and here's what you wanted answered the most. What are the biggest drivers of the sell-off? There are many, but here are three big ones. First, growth. The US economy is still strong and global growth is holding up better than expected. That's an environment that bonds traditionally fare poorly in as investors prefer stocks in fast growing economies. [music] Strong growth can also keep inflation bubbling, forcing central banks to keep interest rates higher or raise them [music] further. Both forces push bond prices down and yields up. Second, [music] oil. The Iran war has driven Brent prices to as high as $126 [music] a barrel, pushing up energy costs everywhere and fueling inflation, the bond markets kryptonite. Inflation erodess the value of bonds as fixed payments and can force central banks to [music] keep rates higher for longer. Speaking of central banks, the Federal Reserve raised rates in September, while Australia and Japan have [music] also tightened. Swap traders are expecting more hikes to come as central banks use higher borrowing costs to cool demand and bring inflation lower. But this also tends to push yields higher. How much higher can bond yields go? Market participants have plenty of views on this. Some investors at Tro see 10-year Treasury yields, a global borrowing benchmark, rising to as high as 6% [music] thanks to a resilient US economy. TS Lombard strategists see yields climbing to potentially 8% in the coming years. And our very own Bloomberg Markets P survey found more than half of 173 respondents seeing US 30-year yields hitting 6% [music] by year end. One thing is clear.