The polarisation of bond markets: Austria versus Argentina

Argentinian 100-year bonds down 30% over last week

Austria and Argentina may be alphabetically close, but economically they are at opposite ends of the spectrum.

Much has been made in recent weeks of the exceptional performance of the 100-year Austrian government bond. Year-to-date returns have breached 80%; not what initial buyers would have anticipated for an AA+ rated issue. In a parallel universe, the Argentinian 100-year bond has lost 30% in the past week. Bond performance typically lies with the more opaque role of duration and convexity. Yet in this instance, the looming Argentinian election is the cause of the decimation in the value of its local financial assets. Fears over a bond bubble intensify as negative yielding debt exceeds ...