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Worst bond crash in almost 30 years is early warning of turmoil to come

The global deflation trade is unwinding with a vengeance.

The global deflation trade is unwinding with a vengeance. Yields on 10-year Bunds blew through 1 percent this week, spearheading a violent repricing of credit across the world\’s economic climate.

The scale is beginning to match the “taper tantrum” of mid-2013, when the US Federal Reserve issued its first gentle warning that quantitative easing wouldn\’t last forever, which the long-feared inflection point was nearing in the international monetary cycle.

This is shaping as the worst quarter for sovereign bonds in almost 3 decades.

The Bank of America Merrill Lynch Global Government Index is down 2.9 per cent since the end of March. Whether it holds, it\’ll be the biggest quarterly loss since the third quarter of 1987.

Paper losses in the last three months have reached $1.2 trillion. Yields have jumped by 175 basis points in Indonesia, 160 in Nigeria, 150 in Turkey, 130 in Mexico and 80 in Australia.

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