As inflation ramps up, many market commentators have questioned whether there will be a bond market crash. The Federal Reserve is fighting inflation by unwinding Covid-era monetary policy. Negative-yielding debt is shrinking as fixed-income investors are positioning themselves for interest-rate hikes and the end of large-scale asset purchases by the central bank.
The timing, pace, and magnitude of future rate increases will be critical in determining whether the potential bond bubble deflates slowly over time or experiences a sudden shock.
Over the past decade, declining bond yields, quantitative easing by central banks around the world, and historically low interest rates combined to fuel rapid growth in corporate debt. When the pandemic came along, it pushed these prevailing market trends to extremes. This may have resulted in the "bond bubble" some envision.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.