27 May Fixed Income Perspectives
Voya Investment Management – Fixed Income Perspectives – May 2015
It appears that we’re mired in a period during which central bank activity is more likely to increase volatility than dampen it. We saw this in the Federal Reserve-inspired “taper tantrum” of 2013 as well as the early 2015’s “franc fiasco” attributable to the Swiss National Bank. Now we are seeing a “bund blowup” in Germany, where yields on ten-year issues approached zero before quickly spiking higher as investors appeared to come around to the idea that the European Central Bank’s asset purchases would indeed continue and be supportive of growth. In each of these examples, investors fled the markets as expectations about central bank policy – and specifically balance sheet activity – changed markedly.