The bond market has entered a new world, rewriting the rules on what drive yields higher, economist says

• The bond market is entering a "new world" where supply affects bond yields, T. Rowe Price's chief Europe economist said.
• Central banks were top buyers of bonds, but many shifted to quantitative tightening.
• "But private sector investors have many other options when it comes to purchasing bonds. So yields have to rise to become more attractive."

Across the world, many major economies are pumping the brakes, and that's warping a basic dynamic in the bond market, according to T. Rowe Price's chief European economist. 

While popular theory argues long-term interest rates are just the average of future short-term interest rates, with the supply of bonds not a factor in setting yields, Tomasz Wieladek said "that is not the state of the world we are in today."

That's because the bond market is missing its biggest buyers: central banks.