Global bond rout looks ‘tremendously dangerous’ for stocks, hedge fund manager warns

Bond rout 'tremendously dangerous' for equities, CIO says

That environment has shifted as central banks have pushed ahead with rate hikes to tackle higher inflation. That, in turn, has pushed bond yields higher and sapped money from government budgets by raising borrowing costs.

In the U.S. Treasury market — a crucial component of the global financial system — bond yields have surged to highs not seen since the onset of the global financial crisis. In Germany, Europe’s largest economy, yields have hit their highest level since the 2011 euro zone debt crisis. And in Japan, where interest rates are still below 0%, yields have risen to 2013 highs.

“I think that is going to cause a lot of pain moving forward in terms of the economy,” Neuhauser said.

Bond bears ‘back from the dead’

Those fiscal imbalances are giving “a lot of ammunition to the bond bears,” the hedge fund manager added, with interest rates likely to remain higher for longer.

“What you’re seeing now with the bond market is, you know, bond vigilantes are back in vogue, back from the 80s, back from the dead, and I think they’re leading the market today,” Neuhauser said.

Neuhauser’s statement echoes similar comments earlier this week from UBS Asset Management’s head of global sovereign and currency, Kevin Zhao, who said “the bond vigilante is coming back.”

NEW YORK, NY - FEBRUARY 27: Traders work on the floor of the New York Stock Exchange on February 27, 2020 in New York City. With concerns growing about how the coronavirus might affect the economy, stocks fell for the fourth straight day. The Dow Jones Industrial Average lost almost 1200 points on Thursday. (Photo by Scott Heins/Getty Images)

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