A recipe for disaster? 'Coiled spring' bond market falls 'just the beginning', experts warn

Low bond yields and vaccine roll-out could 'spell trouble'

A combination of record low bond yields, inflationary expectations and the continuing vaccine roll-out could "spell trouble" for bond investors, according to several investment professionals, who warn that ultra-loose monetary policy over the past decade has left the asset class "a coiled spring" susceptible to further price falls as prospects for the global economy improve.

According to data from AJ Bell, 10-year gilt yields have returned to pre-pandemic levels for the first time since March last year, having risen from 0.2% to 0.75% since the start of 2021. Investment Conundrums: Dimensional's Plecha on why fixed income is 'as effective now as it has ever been' Yields on 10-year Treasuries have also returned to levels last seen before the coronavirus crisis, having now reached almost 1.4%. Laith Khalaf, senior analyst at AJ Bell, warned that as the global vaccine roll-out leads to a swift economic recovery, price falls seen across bonds this year "co...