Analysis-Global bonds move in lockstep, ramping up investors' risk

Globally synchronised government bond prices make it harder for investors to diversify their portfolios and increase their risk of being caught off guard by market turbulence.

As central banks across the world step up their fight against inflation, correlations between currency-adjusted returns on the government debt

nations including the U.S., Japan, the U.K., and Germany are at their highest level in at least seven years, according to data from MSCI.

This means that market action on the opposite side of the world might increasingly have a negative impact on investors holding a country's debt.

 A recent instance occurred late last month when U.S. yields spiked along with those on British government debt after the UK's tax cut plan shook markets.

However, once the Bank of England bought long-dated UK bonds to restore financial stability and the government reversed its plans, yields on both government debts sharply fell.


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