Bond Buyers See No 1994 Rout Helped by Bernanke Clarity

Bond investors are gaining confidence that Federal Reserve Chairman Ben S. Bernanke will unwind the central bank’s unprecedented $3.3 trillion balance sheet without sparking a crash similar to 1994, when Alan Greenspan surprised the market by doubling benchmark lending rates in 12 months.

Though sovereign debt levels have more than quadrupled to $23 trillion, yields for 10-year Treasuries are 5 percentage points lower than they were in 1994 and forward measures show the current 1.74 percent level rising only to 2.04 percent in a year. Policy makers’ forecasts of no rise in the target interest rate for overnight loans between banks until 2015 are damping yields in a market dominated by the Fed’s $1.84 trillion, or 15.4 percent of the $11.94 trillion in marketable U.S. debt.