An abrupt start to a gradual bear market in bonds

There are always fears among investors when monetary authorities (especially at the Fed) consider shifting to a less dovish stance. However, there is a profound difference between scaling back quantitative easing and tightening. The Fed will begin tapering this year (in line with the improvement in domestic growth), but rate hikes are still a long way off. The central bank is determined to keep interest rates (or the cost of borrowing) below economic growth (or return on investment), in order to support a sustained economic expansion.

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