Bond selloff: did people get a little overexcited?

However, according to Kaspar Hense, senior portfolio manager at RBC BlueBay, bond yields are not set to decline in the near term.

“For bond yields to decline significantly we would need to see a more recessionary outcome which would drive unemployment rates up and lead to lower investment returns more broadly,” he says.

Bond prices continued to slide in Asia and Europe on Wednesday after borrowing costs reached multi-decade highs as the Middle East conflict drives up energy prices and layers concerns about inflation on top of worries about ballooning government debt.

Global stocks and bonds look set to snap their recent losing streaks after inflation fears rattled markets despite oil prices being below the levels breached in late July when bond markets were calmer.

“The question must be asked, how much of recent angst was just a combination of ‘back to school’ for markets and the usual ‘first day of the month’ syndrome?,” Chris Beauchamp, chief market analyst at IG, says.

“Bond market troubles don’t disappear overnight, but recent surge in yields was nothing compared to 2022, so perhaps everyone just got a little overexcited,” he adds.

Beauchamp flags that stocks were mostly up on Wednesday, particularly in the U.S., as was gold, while volatility was lower.