Fixed income

Japanese institutional managers -- known for their legendary U.S. debt buying sprees in recent decades -- are now fueling the great bond selloff just as the Federal Reserve pares its $9 trillion balance sheet.

The Bloomberg Global Aggregate Index has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990.

The moves come after Powell struck a hawkish tone on Monday, prompting traders to rapidly ratchet up estimates for how aggressively the Fed will tighten monetary policy this year.

The repricing comes as Federal Reserve Governor Michelle Bowman suggested a hike of that magnitude could be on the table if inflation readings come in too high.

Treasuries led losses in global bond markets as inflation concerns, stoked by soaring oil prices, overshadowed any haven bids on the back of Russia-related tensions.

With minimal coupon protection, exceedingly long duration and super-tight credit spreads, the powder keg was fully loaded. Now we have sizzling inflation and hawkish central bankers providing us with the spark.

Government bonds worldwide are extending declines after the worst six months in five years, a Bloomberg index showed. Meanwhile, the pool of negative-yielding debt shrank to a six-year low.

Pension funding versus liabilities was close to 100% at the end of 2021, for the first time since the financial crisis, according to investment advisory firm Milliman.

U.S. Treasuries gained, bouncing back from an initial wave of selling after consumer-price inflation accelerated at the fastest annual pace in four decades in December.

The bond selloff that pushed 10-year Treasury yields to their highest in two years may not lead to a full-on taper tantrum, according to one of the biggest Treasury options market makers.