The relentless sell-off in government bonds worldwide remained the dominant force in financial markets last week.
The 10-year Treasury yield rose to its highest level since 2002, and the US Dollar Index gained as a result. If it wasn’t already abundantly clear, we are now witnessing a flight to safety episode, as the dollar rallied in spite of softer inflation and jobs data that has pushed back market expectations of Fed hikes – as witnessed by the fact that the best performer for the week was the Swiss franc. Oil fell sharply after the G7 agreed on an emergency release of crude and diesel, yet yields kept rising, a further sign that this rout is now driven by the growing risk premium attached to sovereign debt with increasingly shaky fundamentals.