Amid a sharp selloff in the bond market, players in Europe's low-yielding papers have gotten their fingers burned, big time.
It's "ugly bond math," Hans Mikkelsen, a credit strategist at Bank of America Merrill Lynch, said in a note last week. The 30-year German bund prices declined around 12 percent over a two-week period, with a 53-basis-point increase in yield, which tots up roughly 25 years' worth of yield, he calculated.
That compares with a typical high-yield bond, for which a 53-basis-point rise in yield would suggest an around 2.3 percent price fall, erasing only around a third of a year's worth of yield, Mikkelsen said. Bond prices move inversely to yields.
Bond yields have moved even further since that report was written.
Germany's bonds have taken the brunt of the selloff, with the 30-year yielding around 1.22 percent, up from 0.436 percent on April 20, while the benchmark 10-year's yield is around 0.603 percent, up from around 0.077 percent on April 20.
That's not terribly surprising, Bastien Drut, a strategist at Amundi, said in a blog post last week.
"After more than five quarters of declining German yields, it is logical to be seeing some profit-taking," he said. "This is even easier to understand since long-term rates were quickly moving towards negative territory."