(Harvest) This Bank of England research suggests that bond bears are not just correlated to fundamentals like higher inflation but also underperformance in GDP and equity returns during the 20th century. The author conducts case studies for some of the most recent large bond bear markets in the post-WWII period. He finds that while fundamentals like inflation are a key reason for a bond bear market as in the case of the ’65-’70 sell-off, there have been other cases which are not related to fundamentals like the ’94 bond massacre or the ’03 Japanese VaR shock. The author suggests that central miscommunication or non-fundamentals can also trigger a bond bear market.
Interest rates for the ages – “Winter is coming” for bonds but it can take a number of forms
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