How high yields go is still a highly polarising question - ANZ

Analysts at ANZ explained that for the first time since March last year, the US 10-year bond yield is back over 2.5%; a key level in some analysts’ eyes. 

Key Quotes:

"Indeed Bill Gross feels so, tweeting overnight the “Bond bear market confirmed today”. Direct catalysts for the move (at least out of the US) were not initially obvious, but some may have been spooked by yesterday’s decision by the BoJ to trim its regular bond purchases even though many saw this as technical in nature and not a shift in stance."

"The ongoing strong dataflow out of Europe and what it means for the ECB’s dovish stance could also be featuring. Whatever the case, it follows on from what was surprising price action after Friday’s disappointing NFP release, where bonds also sold off, and perhaps speaks to not only market positioning at present, but a market that is possibly questioning how flat the curve had become. 

How high yields go is still a highly polarising question. But if real yields start to rise convincingly too, we’d be keeping a close eye on broader asset valuations as their lofty levels may start to be questioned."