3 years on from the 'taper tantrum', where next for bond mkt
May 24, 2016 15:07:49 GMT 7
wildoats likes this
Post by Fletchsmile on May 24, 2016 15:07:49 GMT 7
At the time some people thought it would be a large issue.
Three years on from the 'taper tantrum', where next for bond markets?
Three years ago the US Federal Reserve sent a shockwave through government bond markets with the suggestion it would ‘taper’ (gradually withdraw) its quantitative easing (QE) programme.
QE created significant demand for government bonds, which helped drive yields to record lows and prices higher. To taper QE would reverse this, or so the theory went.
What was the ‘taper tantrum’?
On 22 May 2013 Ben Bernanke, then Chairman of the Federal Reserve, hinted the US economy could survive without life support and the $85 billion pumped into the economy each month might be reduced slowly.
Bond market traders panicked and the subsequent sell-off caused yields to spike sharply higher and prices to fall. The speed and severity of the sell-off (and ultimate rebound) was akin to traders throwing their toys out of the pram – hence it was nick-named the ‘taper tantrum’.
Some commentators were keen to bang the final nail into the government bond market’s coffin and suggest a multi-decade run of generally strong performance was at an end. These predictions have been common in recent years – excessive pessimism and an eagerness to call the next crisis has been the worst mistake of many an investor since the financial crisis.
contd.
www.hl.co.uk/news/articles/three-years-on-from-the-taper-tantrum-where-next-for-bond-markets
Three years on from the 'taper tantrum', where next for bond markets?
Three years ago the US Federal Reserve sent a shockwave through government bond markets with the suggestion it would ‘taper’ (gradually withdraw) its quantitative easing (QE) programme.
QE created significant demand for government bonds, which helped drive yields to record lows and prices higher. To taper QE would reverse this, or so the theory went.
What was the ‘taper tantrum’?
On 22 May 2013 Ben Bernanke, then Chairman of the Federal Reserve, hinted the US economy could survive without life support and the $85 billion pumped into the economy each month might be reduced slowly.
Bond market traders panicked and the subsequent sell-off caused yields to spike sharply higher and prices to fall. The speed and severity of the sell-off (and ultimate rebound) was akin to traders throwing their toys out of the pram – hence it was nick-named the ‘taper tantrum’.
Some commentators were keen to bang the final nail into the government bond market’s coffin and suggest a multi-decade run of generally strong performance was at an end. These predictions have been common in recent years – excessive pessimism and an eagerness to call the next crisis has been the worst mistake of many an investor since the financial crisis.
contd.
www.hl.co.uk/news/articles/three-years-on-from-the-taper-tantrum-where-next-for-bond-markets
