The collapse in Treasury bonds now ranks among the worst market crashes in history


A bond trader shouting on the phone.

The bond market has been suffering as yields continue to climb. The 30-year Treasury surpassed 5% for the first time in decades, with experts seeing a similar path ahead for the 10-year note.Scott Olson/Getty Images

  • Since March 2020, Treasury bonds with maturities of 10 years or more have plummeted 46%, Bloomberg says.

  • That’s just under losses seen in the stock market when the dot-com bubble burst.

  • The bond rout is worse than the one seen in 1981 when the 10-year yield neared 16%.

The bond-market sell-off that’s sending yields soaring is starting to eclipse some of the most extreme market meltdowns of past eras.

Bloomberg reported losses on Treasury bond with maturities of 10 years or more had notched 46% since March 2020, while the 30-year bond had plunged 53%.

Those losses are nearly in line with stock-market losses seen during the worst crashes of recent history — when equities slumped 49% after the dot-com bubble burst and 57% in the aftermath of 2008.

Compared with previous bond-market meltdowns, long-term Treasurys are seeing one of the most extreme undoings in history. The losses are over twice as big as those seen in 1981 when 10-year yields neared 16%.

That crash came as the former Federal Reserve chair Paul Volcker grappled with historic inflation and pushed the federal funds rate to just under 20%.

While interest rates remain well below that level today, the central bank’s aggressive turn toward monetary tightening in the post-pandemic era has caused a similar bond-market rout. And traders have continued selling amid concerns of rebounding inflation, while a deluge of Treasury issuance this year has also pressured bond prices.

Long-duration yields have climbed to their highest since 2007 as a result, with the 30-year note passing the 5% barrier for the first time in decades. Investors expect a similar path for the 10-year, which is hovering at just more than 4.7%. Well-known investors, including Bill Ackman, Ray Dalio, and Bill Gross see the 10-year hitting 5% in the near term.

Read the original article on Business Insider


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