Turmoil in UK government debt has sent shockwaves through global markets, sparking big swings in US and European bonds.
“Bond markets are always highly correlated, but we’ve definitely seen the tail wagging the dog this week,” said Dickie Hodges, head of unconstrained fixed income at Nomura Asset Management. “The moves in gilts were so big that they filtered through to European and US bond markets.”
The 10-year US Treasury, the benchmark in the world’s biggest and most important debt market, on Wednesday posted its biggest one-day rally since March 2020 after the Bank of England announced emergency bond purchases to halt the freefall in UK government debt. Those gains followed heavy losses for global bond markets since last Friday as the heavy sell-off in gilts spread around the world.