Investor sentiment and China help US bonds to perform well

The Federal Reserve embarked on the current tightening cycle just over a year ago. The Fed Funds rate bottomed at 1% and has headed gradually higher in 0.25% steps to its present level of 3%. During the same period the yield on the 30-year 'long bond' has fallen steadily from around 5.3% to 4.3%. When US interest rates started to rise from very low levels back in 1994, the outcome was very different. The first 2% rise in interest rates actually produced a 2% rise in 30-year bond yields. The question is, why have bonds behaved so much better in 2005 than in 1994? As far as we can see,...