Markets fall as bonds face “moment of truth”

Markets mostly fell on Wednesday.

The S&P 500 fell 0.5 percent, the STOXX Europe 600 fell 0.6 percent and the Nikkei 225 fell 0.5 percent.

“It is clear that markets are reacting to some disappointing earnings, because the economic picture remains robust,” said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.

However, investors may also be getting nervous about interest rates. The yield on the 10-year Treasury note rose 3.8 basis points to 2.444 percent on Wednesday after DoubleLine Capital Chief Investment Officer Jeffrey Gundlach tweeted on Tuesday that the “moment of truth has arrived for secular bond bull market”.

“If inflation ticks up [and] central banks respond, then I think we have a much more volatile picture,” Bessemer Trust's chief investment officer Rebecca Patterson said on CNBC on Tuesday.

Indeed, Ravi Menon, managing director of the Monetary Authority of Singapore, told Bloomberg on Tuesday that risks “have been manifesting” and “those risks are being underestimated”.