Mohamed A. El-Erian , Columnist

Higher Yields in 2018 Don't Mean Market Turmoil

Thank better growth dynamics in the U.S. and Europe.

January 19, 2018 at 7:00 AM UTC

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Don't worry so much.
Photographer: Spencer Platt/Getty Images

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The performance of U.S. Treasuries in 2017 confounded many, as the bonds kept to range-bound trading in the context of both higher growth and rate tightening by the Federal Reserve that went beyond initial market expectations. Therefore, it should come as no surprise that the recent move up in yields has triggered so many reactions, including warnings that we may be at the end of one of modern history’s greatest bull markets for fixed income. Yet while the specific level of yields is important, the nature of the move and its drivers will play an equal if not greater role in determining the broader economic and market effects.

The benchmark yield on U.S. government bonds traded in just a 30 basis-point range for most of last year. The absence of both higher yields and greater volatility in bond markets was notable given what happened elsewhere in markets and the economy.