M&G's Leaviss: Beware the widow-maker

The one trade to watch out for

Throughout my 25 years in bond markets, there has always been one trade that becomes known as 'the widow-maker'. Being underweight long-dated gilts was one, at a time when new pension regulations sent yields plummeting, and shorting the Japanese bond market also became deadly as the Bank of Japan slashed rates to zero.

Today, widows and widowers are being made in the German bund market. Yields on the 10-year bund are now trading at record lows; bond investors pay 31 basis points per year for the privilege of lending to the German government. M&G's Leaviss tackles the big questions for bond investors As yields collapse, forecasts and expectations are quickly revised lower. In the wake of Mario Draghi's European Central Bank (ECB) speech last month we even saw one investment bank speculate that the 10-year bund yield could fall from -0.31%, to -2%. We have already had more than €2trn of quantitative e...