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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Keir Starmer's Brexit diary: Why doesn't David Davis want to answer my questions?

The shadow Brexit secretary on the resignation of Sir Ivan Rogers, the Prime Minister's speech and tracking down his opposite in government. 

My Brexit diary starts with a week of frustration and anticipation. 

Following the resignation of Sir Ivan Rogers, I asked that David Davis come to Parliament on the first day back after recess to make a statement. My concern was not so much the fact of Ivan’s resignation, but the basis – his concern that the government still had not agreed negotiating terms and so the UKRep team in Brussels was under-prepared for the challenge ahead. Davis refused to account, and I was deprived of the opportunity to question him. 

However, concerns about the state of affairs described by Rogers did prompt the Prime Minister to promise a speech setting out more detail of her approach to Brexit. Good, we’ve had precious little so far! The speech is now scheduled for Tuesday. Whether she will deliver clarity and reassurance remains to be seen. 

The theme of the week was certainly the single market; the question being what the PM intends to give up on membership, as she hinted in her otherwise uninformative Sophy Ridge interview. If she does so in her speech on Tuesday, she needs to set out in detail what she sees the alternative being, that safeguards jobs and the economy. 

For my part, I’ve had the usual week of busy meetings in and out of Parliament, including an insightful roundtable with a large number of well-informed experts organised by my friend and neighbour Charles Grant, who directs the Centre for European Reform. I also travelled to Derby and Wakefield to speak to businesses, trade unions, and local representatives, as I have been doing across the country in the last 3 months. 

Meanwhile, no word yet on when the Supreme Court will give its judgement in the Article 50 case. What we do know is that when it happens things will begin to move very fast! 

More next week. 

Keir