“Bond yield tantrums”
Hi The ASX 200 Healthcare Index chart that you included in Wednesday's portfolio report included a couple of "bond yield tantrum" falls. Could you please explain what a "bond yield tantrum" is. Cheers, Carl
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Answer
Hi Carl,
Its a phrase which has been fairly liberally used over recent years to explain why rate-sensitive stocks/sectors have endured deep corrections.
- When bond yields appreciate faster than was expected, sectors negatively impacted by higher interest rates often pullback sharply as investors are incorrectly positioned for the new macro backdrop.
Healthcare is an ‘interest rate sensitive sector’ because they are generally higher valuation growth companies, and when we value their future earnings, a higher risk free rate creates a higher hurdle to own them, all else being equal.
chart
ASX200 Healthcare Sector v Australian 10-year Bond Yield
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ASX200 Healthcare Sector v Australian 10-year Bond Yield
