The great German government bond sell-off mystery

The wholesale sell-off of German bonds affects the whole European market but it is not so easily explained ... yet

It's a head-scratcher. Why have investors suddenly decided to dump German government bonds? The sell-off, seemingly on no news, has been extraordinary, affecting the entire European bond market. Yields, which move inversely to the price of the bond, briefly hit 0.8% on 10-year German debt on Thursday. Then they fell to 0.57%, but even that represents a surge from 0.1% only a few weeks ago.

A glib explanation is to say that the ultra-low yields were wrong in the first place. Deflation is a worry, not a probability, so isn't lending to any government for a decade for a near-zero return a surefire way to destroy your capital? But that doesn't explain the suddenness of the move: the market in German government debt is meant to be deep, liquid and populated by grown-ups.