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Yields in terra incognita

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Earlier this month, US Federal Reserve Board Chairman Ben Bernanke disclosed to the financial markets that the FED would not be taking away the “punchbowl” any time soon, but would likely serve less punch.

Allianz SE
Munich, Jun 26, 2013

Chairman Bernanke indicated to investors that the Federal Reserve would begin moderating its monthly USD 85 bn assets-purchasing program some time during the coming months, with the possibility of unwinding the program altogether during the course of next year. In response, market correction across the credit spectrum was sharp and intense. Notably, the US 10-year Treasury backed up from a 1.6% level during the month of May to 2.3% as of June 19th. Yet, even given this recent volatility surge, benchmark government yields for reserve currency countries still remain at very low levels historically, and they may remain so for some time.