BlackRock: Rising yields weaken the stabilizing role of long-term Treasuries in portfolios

The rise in developed market bond yields has reinforced BlackRock's view that the ballast of portfolios provided by traditional diversification vehicles such as long-term US Treasuries has weakened. BlackRock said in a report that the surge in long-term bond yields partly reflected heightened concerns about loose fiscal policy and a deteriorating fiscal outlook. Yields on Japan's 30-year bonds hit a record high earlier this month and have risen more than 100 basis points this year, the company said. "The latest rally was triggered by a fiscal spending package from the Japanese government and the Bank of Japan's hint this week that it may raise interest rates." The central banks of Australia and Canada have also changed their tone on interest rates, either signalling the end of rate cuts or the possibility of a rate hike.