Here Are the Most Unusual Moves Happening in Bond Markets Right Now

At some point this week, the world’s interest rate traders collectively woke up and decided to price in a massive tightening of monetary policy around the globe, leading to some very dramatic and at times strange moves in the bond market.

Central banks now face a challenge as bond markets foreshadow one of the starkest hiking cycles in recent history, with everything from German bunds to Brazilian bonds, British gilts and U.S. Treasuries now pricing in more imminent increases to benchmark rates.

“If the bond market is signaling something, then it is the possibility of the fastest liftoff since the financial crisis,” says Ben Emons at Medley Global Advisors. “A synchronized selloff is happening in short-term yields each time a central bank hints at raising rates. New Zealand, UK, Canada, Australia and now Europe are experiencing a quake at the front-end of their yield curves.”

Here are some of the more extreme moves happening in bond markets right now.

Yields on shorter-term debt have soared around the world as investors scrambled to get out of positions that might be affected by central bank tightening, with one of the more emblematic moves taking place in Australian government bonds.

The shift started after Australia’s consumer price inflation came in stronger than expected, with the highest reading in six years spurring traders to boost bets that the country’s central bank will need to tighten aggressively to rein in prices. On Friday, Aussie bond yields were once again on the move with the benchmark 10-year jumping about 14 basis points.