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Bill Gross: Japan shock confirms bond bear market

Bill Gross: Japan shock confirms bond bear market

A surprise move by the Bank of Japan to reduce the amount of bonds it buys every month under its stimulus programme has sparked jitters in the fixed income market.

The Bank of Japan has reduced its  monthly purchases of 10- to 25-year government bonds and 25 to 45-year debt by 10 billion yen (€74 million) to 190 billion yen and 80 billion yen.

While that amounts to only a small change, the hint of a tapering to stimulus was enough to send bond prices lower, and yields higher.

The yield on US 10-year treasuries hit 2.57% overnight, its highest level in 10 months, prompting fixed income guru Bill Gross to declare a 'bond bear market'.

In a Tweet, the Janus Henderson fund manager said: 'Bond bear market confirmed today. 25 year long-term trendlines broken in 5yr and 10yr maturity Treasuries.'

Analysts at Rabobank said that while the 10-year treasury yield had reached higher levels in March last year, the latest sell-off appeared significant.

'We might just have broken the long-run bull-market trade of the past few decades,' they said.

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