- Longer-duration Treasury prices have plunged in recent weeks, driving benchmark 10-year yields toward 5%.
- The collapse now ranks among the worst in history.
- These charts show how the meltdown compares to previous market crashes, including the 2008 financial crisis.
US bond prices have plummeted in recent weeks, turning what had already been a bad stretch into one of the market’s worst-ever routs.
Yields on 10- and 30-year US Treasurys are approaching 5% for the first time since 2007 with investors fretting that the Federal Reserve will keep interest rates at their current level well into 2024 in a bid to kill off inflation.
Long bonds have never had a run this bad, according to data from Bloomberg – with the losses the asset class has racked up since March 2020 even exceeding a dreadful period during the 1980s, when the Fed raised borrowing costs as high as 16%.
Over the past three-and-a-half years, iShares’ 20+ Year Treasury ETF, which trades under the ticker TLT and tracks longer-duration government bond prices, has tumbled a staggering 44%.
To capture the magnitude of that sell-off, bondholders right now are probably feeling even worse than stock traders did in 2022.
Equities are traditionally seen as a much more volatile asset class – but in a dismal year defined by soaring inflation and higher rates, the S&P 500 fell “only” 20%.
You’d have to go much further back to find a time when the benchmark index suffered comparable losses to the ongoing long-bond rout.
In 2008, the onset of the financial crisis wiped out Lehman Brothers and triggered a stock-market collapse in which the S&P 500 shed nearly half its total value in the space of just six months.
Still, bonds’ nightmarish couple of years still doesn’t stack up to one of the most dramatic crashes this century, driven by the dot-com bubble bursting.
Between March 2000 and October 2022, the tech-heavy Nasdaq Composite index dropped an eye-watering 72%, giving up all its gains from the previous five years.
