The Bernanke effect: Bond investors face worst first half since 1994

US fixed income investors are on course to suffer their worst first half of a year for nearly two decades following the Federal Reserve’s remarks around curtailing its enormous quantitative easing programme.

In falls not seen since the bear market of 1994, the latest figures from the Barclays US Aggregate Index, a key benchmark for fixed income managers, show a total loss of 2.55% since January, according to the Financial Times.

The falls leave it on course for its worst showing since the first six months of 1994 and come after Ben Bernanke, chairman of the Fed, spooked investors by warning QE could be cut back as early as Q3 this year.

The impact of his words was evident from day one, with US treasury yields spiking from around 1.7% to to 2.5% since the start of May.

UK gilts have also unwound, with yields climbing to 2.44% as investors exit former safe havens.

This huge move up has been felt even more in debt markets further up the yield curve.

According to the FT, the Barclays index for US investment grade bonds has seen a total loss of 3.5% in the last quarter alone, leaving it facing its worst start since 1994 as well.

This article was previously published on Investment Week

 

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