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

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 for the 10-year note.

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Since March 2020, 10-year Treasury bonds have plummeted 46%. 
That’s just under losses seen in equities during the dot-com bubble.
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.

According to Bloomberg, losses on the 10-year note have notched 46% since March 2020, while the 30-year bond has 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 to previous bond-market meltdowns, long-term Treasuries 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 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 towards 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 currently hovering just over 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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