SYDNEY: The steepest global bond rout of the modern era extended yesterday, with Australian and New Zealand yields surging and traders in Tokyo braced for intervention from the Bank of Japan (BoJ).

       Aussie three-year sovereign yields jumped as much as 11 basis points (bps) to 2.33%, the highest since December 2014, as the nation’s debt caught up with Friday’s tumble in Treasuries.

       Japan’s benchmark 10-year yields closed Friday just 1.5bps below the 0.25% ceiling the BoJ has indicated is the top of its allowed range, so Tokyo traders are bracing for intervention.

       Yields on United States notes due from two- to 10-years all surged at least 10bps Friday, as traders priced in two full percentage points of interest-rate hikes from the Federal Reserve (Fed) over the remainder of this year.

       “Momentum for bonds globally is all one way at the moment, as Treasuries slump on Fed-hike expectations,” said Damien McColough, head of fixed-income research at Westpac Banking Corp in Sydney.

       “Even as moves look stretched there are few signs of the current trend bottoming out.”

       New Zealand’s bonds also sold off sharply yesterday, with two-year rates soaring 9bps to touch 2.90%.

       Bloomberg’s Global Aggregate Bond Index has slumped 7% this year, exceeding the record 5% full-year loss the gauge posted in 1999.

       Investors are dumping bonds on expectations the Fed will lead an aggressive wave of global central bank tightening this year with the impact of Russia’s war in Ukraine expected to drive up inflation from current levels that are already the fastest since the 1980s.

       Back on Feb 10, the central bank announced an operation for Feb 14 to offer to buy an unlimited amount of bonds at a fixed rate of 0.25%.

       Australia’s bonds are falling in line with Treasuries even though the Reserve Bank of Australia has insisted it remains patient about the need to hike interest rates. — Bloomberg