'Worse to come' as bond markets suffer flash crash

Fund managers are urging caution following a dramatic week for investors, saying the traditional strategy of buying on market falls may no longer make sense.

Even the most liquid bond markets saw near-unprecedented moves last week as volatility returned with a vengeance, despite little in the way of concrete statistics other than poor US retail sales data. Wednesday’s ‘flash crash’ (in yields, not prices) saw the 10-year US treasury yield drop as much as 34bps to 1.84%, before rallying to 2.15% in the same session. It was a similar scenario in Thursday’s trading, as core bond yields plunged and peripheral European yields spiked before reversing course. John Pattullo, manager of the £1.2bn Henderson Strategic Bond fund, said last Wednesd...