It all seemed so easy, but then along came Italy and Cyprus

Bond yields: watch out for the great rotation.

Watch out for the great rotation was the ubiquitous catch phrase as we entered 2013. Bond yields had become absurdly low, in many cases negative, in real terms. Equities were fairly valued and, with the major central banks of the world printing money like "no tomorrow", inflation would soon take off, reducing bond markets to rubble, whereas stocks would offer good inflation protection. What could go wrong-buy equities and sell bonds?

It all seemed so easy, and by the end of January it all looked fine and dandy-equities were duly perky, and ten-year US Treasury yields had climbed over 2 per cent, from around 1.75 per cent at the end of 2012. Then, in February and March, along came Italy and Cyprus.

Italian elections lead to complete impass and raised the possibility that back-tracking on fiscal reform would rear its forbidden head, and worse, it seemed likely that Eurozone policymakers were about to fire both barrels at their own feet, to paraphrase Dutch Finance Minister Dijsselbloem, using the Cyriot confiscation of bank depositors’ money as a ‘template’ to dress the balance sheets of Europe’s weaker banks. This all lead to a flight to safety in US Treasuries, so yields fell back again, their descent hastened by weak US employment figures.

But now the landscape has changed again with the Bank of Japan’s, (BOJ), incredibly aggressive new quantitative easing policy-much bigger as a percentage of GDP than the US Federal Reserve’s programme. There is finally a chance that the Japanese economy will rise from 20 years of slumber, but there is also a great risk that other major central banks be unable to resist the peer group pressure to emulate the BOJ, by ramping up the scale of their own money printing. Hardly a world conducive to lower bond yields, maybe not even in Japan if the government and BOJ are successful and reach their 2 per cent inflation target.

The US economy is already on a relatively robust recovery path, with an enormous corporate cash mountain about to be put to work in investment, now that the imagined dangers of fiscal cliff, debt ceiling and sequestration are receding, and the Eurozone political masters patently just as fanatically committed as ever to ensure the Euro’s survival. US animal spirits will make this soft patch very short and soon the down-leg for the bond market will resume in earnest.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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It's Gary Lineker 1, the Sun 0

The football hero has found himself at the heart of a Twitter storm over the refugee children debate.

The Mole wonders what sort of topsy-turvy universe we now live in where Gary Lineker is suddenly being called a “political activist” by a Conservative MP? Our favourite big-eared football pundit has found himself in a war of words with the Sun newspaper after wading into the controversy over the age of the refugee children granted entry into Britain from Calais.

Pictures published earlier this week in the right-wing press prompted speculation over the migrants' “true age”, and a Tory MP even went as far as suggesting that these children should have their age verified by dental X-rays. All of which leaves your poor Mole with a deeply furrowed brow. But luckily the British Dental Association was on hand to condemn the idea as unethical, inaccurate and inappropriate. Phew. Thank God for dentists.

Back to old Big Ears, sorry, Saint Gary, who on Wednesday tweeted his outrage over the Murdoch-owned newspaper’s scaremongering coverage of the story. He smacked down the ex-English Defence League leader, Tommy Robinson, in a single tweet, calling him a “racist idiot”, and went on to defend his right to express his opinions freely on his feed.

The Sun hit back in traditional form, calling for Lineker to be ousted from his job as host of the BBC’s Match of the Day. The headline they chose? “Out on his ears”, of course, referring to the sporting hero’s most notable assets. In the article, the tabloid lays into Lineker, branding him a “leftie luvvie” and “jug-eared”. The article attacked him for describing those querying the age of the young migrants as “hideously racist” and suggested he had breached BBC guidelines on impartiality.

All of which has prompted calls for a boycott of the Sun and an outpouring of support for Lineker on Twitter. His fellow football hero Stan Collymore waded in, tweeting that he was on “Team Lineker”. Leading the charge against the Murdoch-owned title was the close ally of Labour leader Jeremy Corbyn and former Channel 4 News economics editor, Paul Mason, who tweeted:

Lineker, who is not accustomed to finding himself at the centre of such highly politicised arguments on social media, responded with typical good humour, saying he had received a bit of a “spanking”.

All of which leaves the Mole with renewed respect for Lineker and an uncharacteristic desire to watch this weekend’s Match of the Day to see if any trace of his new activist persona might surface.


I'm a mole, innit.