Bonds were sold off globally. Demand for bonds dropped and, as a consequence, their price has gone down. Because yields move in the opposite direction of bond prices, have recently gone up again.
The German 10-year bund surged to 0.79 percent recently, for example; a strong appreciation in just a matter of weeks. US interest rates followed German interest rates. The 10-year notes in the US list a 2.25 percent yield now, the height of bonds for this year.
Performance Interest Rates
These interesting moves were enough reason for David Rosenberg, from Gluskin Sheff, to take a look back at the performance of interest rates. Not just the last few years, but the last 500 years.
Rosenberg said that they went back to the 16th century and only in the years 1570 and 1930, yields were as low as they have been globally in the last few months. Even with the recent revival of interest rates on government bonds, Rosenberg shows with the chart below how close they are to negative yields.
Only a drop of 50 base points is required for the 10-year yield and you arrive at a return of -2 percent in total. If you go back 10 years in time, you would find enough leeway to get a positive return from a move like that. 2 decades ago, the same note was still strong enough to keep the total return above 3 percent with a ratio of 50 base points. A similar move would result in a return of around 8 percent even 30 years ago.
