It’s been a terrible year for financial markets and maybe even more so when you compare 2022 to over two centuries of data.
Global bonds are now in their first bear market in 76 years, having fallen 20% from their highs, according to a Deutsche Bank study from 1786. The last time global bonds fared so badly, it was in 1946, the year of the first session. United Nations was held in London after the end of the Second World War.
Lily: Historic global bond market crash threatens liquidation of world’s most crowded deals, says BofA
Source: GFD, Deutsche Bank
The driver behind the sharp sell-off in global bonds, which has pushed yields higher in developed markets, is the expectation of much higher interest rates as central banks try to combat the period of the highest inflation in 40 years. As financial market participants rush to price in much higher rates, they have aggressively sold government bonds, pushing yields to multi-year highs, particularly in the United States.
Global government bonds have seen a decade of positive nominal yields wiped out, so far on a 10-year yield basis. “By the end of September 2022, this could be the worst rolling 10-year period for US bonds in history,” the Deutsche Bank researchers said.
“What makes this current period even worse historically is that we are now witnessing significant losses in nominal terms that for many countries have never occurred before over an extended period outside of wars or defaults. payment,” Deutsche Bank Jim Reid researchers Henry Allen said. , Luke Templeman and Adrian Cox.
On Monday, investors and traders continued to sell Treasuries, boosting the policy-sensitive 2-year yield TMUBMUSD02Y,
well above near 15-year highs. At the same time, the TMBMKGB-02Y 2-year gilt rate,
the British counterpart to Treasuries, soared above 4.5% as Bank of England Governor Andrew Bailey said policymakers ‘won’t shy away from changing interest rates if necessary” to bring inflation down to 2%.
