The team over at ING have put together a helpful piece on what they expect assets to do when the Fed start tapering bonds. For the uninitiated tapering of bonds simply means when the Fed makes fewer bond purchases.

A key part of ING’s piece is looking back to 2013 when the so-called ‘taper tantrum’ occurred after the Fed started discussing the reduction of its US Treasury debt purchases. The takeaway that stands out is that gold was the big loser with a fall of nearly 20% between May 01 and September 05 closely followed by EM currencies.

Size of the tantrum

In 2013 the size of the taper tantrum was 150 bps as the 10 year rose from 1.5% to 3% over the course of around 5 months. The key to a ‘tantrum’ is the speed and violence of the move. So, the key here is how far and how fast the bond yields move higher.

ING’s base case is to see US 10 year yields at 1.75% for the year-end. They recognise the risk that 1.75% could be reached in the middle of this year.


The obvious application is that commodities will come under pressure in a taper tantrum repeat. Gold will be the obvious loser, but other commodities are expected to fall. However, oil has separate drivers alongside OPEC+ etc, so bear that in mind.

Emerging markets

In 2013 the so-called ‘fragile five’ (Brazil, Indonesia, India, Turkey and S.Africa) saw a rough 18% decline against a strengthening dollar. ING see the most vulnerable as the ZAR due to its strong gains in 2021. They also see CNY, TWQD and KRW as vulnerable in a taper tantrum scenario. Finally, ING sees EURUSD gaining as a 2H global expansion would favour cyclical currencies like the EUR. Also worth thinking about AUD and NZD strength too.

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