Everything you thought you knew about bond yields is wrong: HSBC

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New York - It's an article of faith in the credit markets that certain fundamental forces propel the yields on government debt, specifically economic growth, state spending, inflation and central bank guidance.

Not so, says HSBC Holdings fixed-income analysts led by Steven Major. Instead, high debt levels, demographic forces and wealth inequality overwhelm the traditional forces cited for the feared unravelling of the bond market's 35-year bull run this year.

"We show that many of the common rules of thumb or ‘heuristics’ that are applied to bond yields are simply false," Major wrote in a client note this week. Major and his team believe that while Treasuries reflect key economic data, it's not clear that they're still the principal drivers of yields. 

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