Just as households adjusted to the hustle and bustle of the new school year, investors were reminded that the summer calm never lasts forever, with September proving far more turbulent than the first two months of the quarter. While equities largely avoided the disorder seen across other asset classes, the bond market was centre of attention, enduring a bruising month as investors rapidly reassessed the outlook for growth, inflation and interest rates. The result was one of the sharpest rises in global government bond yields in recent years, culminating in the US 10-year Treasury yield reaching 5.20% by month end, a level not seen since before the Global Financial Crisis. The significance of September’s moves extends well beyond fixed income markets. Government bond yields represent the foundation upon which virtually all asset prices are built. When yields rise sharply, investors are forced to question the valuation of equities, credit, property and infrastructure alike.
