The causes and consequences of waning demand for very long-dated bonds

Very long-dated government bonds have been under serious pressure at times this year. Demand from traditional sources seems to have waned, and we doubt it’s coming back. In some cases, governments have altered the maturity mix of their issuance to compensate. But, in the absence of genuine fiscal adjustment, which generally seems unlikely to us, we suspect that the very long end of the curve will remain volatile. And there’s a good chance that yields will rise again, at least for a while.