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A Roundabout Path in the “Snapback” of Long-term Bond Yields

Xing, Victor (2018): A Roundabout Path in the “Snapback” of Long-term Bond Yields.

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Abstract

BIS’s Shin noted that a “snapback” in long-term interest rates represents the biggest risk in the global economy, as a decade of policy-induced yield-chasing not only directly lowered long-term rates but also begot further demand. With term premium decompress amid waning policy support, higher long-term bond yields will induce further duration shedding to threaten risk sentiment. Nevertheless, the "snapback" in yields will likely take a roundabout path as flight-to-quality flows from deleveraging exert transient downward pressure in bond yields.

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