Despite Fed tapering, developed nations' bond prices stable

Low inflation, funds' purchases help keep bond prices up

US, EUROPEAN and Japanese bond prices have been remarkably stable in the past two months despite the US Federal Reserve's decision to taper its purchases.

The table shows that 10-year bond yields are below their 2013 mid-year peaks when the Fed announced that it would reduce its bond buying programme. Moreover, yields of US and UK bonds have only fluctuated in a narrow 10 basis point range in the past six months while German bund yields have fallen by 24 basis points from 1.91 per cent in September last year to 1.67 per cent currently.

Bond bears, who have warned investors from purchasing bonds, have therefore been wrong in recent months. They had forecast that yields would rise and the prices...

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