Bond Massacre, Inflation Prick Biggest Bond Bubble in History | Wolf Street

We’ve seen the headlines in recent days. “Worst Bond-Market Drawdown on Record.” Drawdown means drop in prices. “Global Bond Market loses $2.6 Trillion,” was another one. This was based on the Bloomberg Global Aggregate Bond Index, which tracks total returns of government and corporate bonds. And this index of global bonds has plunged 11% from the high in January 2021, the biggest percentage decline in the data that go back to 1990.

Long-term bonds got hit particularly hard. We can see that in the iShares 20-plus Year Treasury Bond ETF, which tracks Treasury securities with 20 years or more in remaining maturities. And it being a Treasury bond fund, it’s supposed to be conservative and save. Its price plunged by 24% since the peak in August 2020.

And the Fed has now acknowledged that this is the #1 problem and it’s going after it, even if it’s still too slowly.

What this means is rising yields and rising interest rates going forward, and lower bond prices, and lower home prices, and lower stock prices. A lot of assets will be repriced in this new era of much higher interest rates.

Bond Massacre, Inflation Prick Biggest Bond Bubble in History | Wolf Street