Bond yields around the world soared from some of the lowest levels in decades last month, as investors anticipated an end to the extraordinary measures the Federal Reserve has used to stimulate the US economy.
US funds that invest in higher-rated bonds with average maturities of under 10 years lost an average 1.8 per cent in May, marking their worst performance since the depths of the financial crisis in October 2008, according to Lipper, a research group.
Such a broad decline has been rare for these funds. With more than $900 billion in assets, these investment vehicles have attracted the lion’s share of inflows from savers in search of regular income and low risk since the crisis.
However, Treasury prices fell as yields on US 10-year government bonds rose from 1.6 per cent at the start of May to 2.1 per cent. Ben Bernanke, Fed chairman, last month said that bond purchases designed to hold down interest rates could slow in coming months as the US recovers, a shift that could have far-reaching consequences for US debt markets, perhaps signalling a turning point in the 30-year bull market for bonds.
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