Bonds start to crack

We have just seen the largest weekly bond outflow ($5.9bn) in 18 months, according to Michael Hartnett, Chief Investment Strategist at BofA Merrill Lynch Global Research.

The sell-off has been led by redemptions in higher yielding sectors (HY and EM debt) and Hartnett points out that global government bonds are on course in 2015 for the second largest annual loss in 30 years. See chart.

Hartnett says emerging markets are most particularly in “carnage”, suffering the largest outflow from debt in 20 weeks and the largest outflow from equities in 25 weeks.

See chart.