By Dr. Carla Pasternak
Government bonds are selling off around the world. Last week, the benchmark 10-year U.S. Treasury yield rose to the highest level in eight months, the yield on the 10-year German government bund was the highest since September, while the 10-year U.K. government bond yield was the highest since November. Bond yields rise as prices fall and bonds lose value.
The selloff in safe haven bonds reflects an improved outlook for economic growth in the U.S. and Eurozone, easing deflation fears, and expectations that the Federal Reserve will start raising short-term interest rates this year for the first time since 2006.
Returns on investment-grade corporate bonds have also been pushed into negative territory so far this year. Barclays Capital U.S. Credit Bond Index is down nearly 1%, as investors worry that new bonds issued at higher yields will reduce the value of existing bonds.
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