A bear market has possibly started in US government debt with recent hawkish-sounding comments from central bankers cited as a reason for a potential sea-change in sentiment, according to Coutts, the private bank.

As a consequence, the firm said it is continuing to shift portfolios towards equities.

For several years, wealth managers have had to contend with the fact that central banks such as the US Federal Reserve, European Central Bank and Bank of England have been keeping official interest rates at historically low levels, hitting cash returns and using such “financial repression” to encourage equity markets to rise. But there may be early signs that the period of such ultra-loose monetary policy may be starting to near an end. Already, Coutts has suggested risks to the global economy might be waning, and has cut exposure to gold, a traditional safe-haven asset.

In a regular note on its economic and investment thinking, Coutts said that at 1.91 per cent, US 10-year government bond yields trade at their highest level since May 2012.

The trigger for a breakout from recent trading ranges was the report of recent comments from the US Federal Open Market Committee meeting on 12 December, the bank said.

What was particularly crucial were comments where some FOMC members said it would be sensible for the Fed to stop or slow purchases of assets – the process of “quantitative easing” – “well before the end of 2013”. At least one Fed policymaker said any further asset purchases were unwarranted. The comments have already boosted the value of the dollar and hit equities, according to reports.

“Until yesterday [Thursday] investors had been happily buying bonds on the basis that the Federal Reserve’s previous communications suggested no tightening of policy until 2015, by which time unemployment might possibly have fallen below 6.5 per cent. However, the latest Fed minutes seem at odds with the view that interest rates will remain low for a long time to come,” Coutts said.

“The answer is probably that the Fed is still happy to keep policy rates low for some considerable time, although other forms of monetary loosening may be withdrawn as the economy improves. It’s important to remember that the change in Fed action to provide much more accommodating monetary policy occurred just after a summer when the US economy appeared to be in the doldrums,” it continued.

“Fed communications are clearly in a difficult space and we hope Fed board members will use speeches in the coming weeks to add clarity. However, ‘the cat is out of the bag’ as they say, and longer-dated bond yields are on the rise. Bond investors may increasingly be mindful of the losses they are accumulating as yields rise. 10-year bonds have now lost close to 3 per cent in capital value since early December. Bonds are no longer the one-way winning bet investors have enjoyed in recent times,” the bank said.