When reflecting on current conditions in the bond markets it is worth remembering two aspects of their behavior. The first is that traders operate ruthlessly and quickly to changes in sentiment and expectations. And secondly, these changes may appear to be based on objective assessments of ‘the numbers’ but they embody many subjective views of the prospects for returns on debt. There is currently quite a divide between the negative mood in bond markets and increasingly positive news in the ‘real’ economy.
The consequence of the ruthlessness and speed of action of traders is that the markets have become an
