The bond market sell-off that is sending yields skyrocketing is beginning to surpass some of history’s most extreme market collapses.
Bloomberg reported that since March 2020, losses on Treasury bonds with maturities of 10 years or more have reached 46%, while losses on 30-year bonds have reached 53%.
These losses are comparable to the worst stock market crashes in recent history, when equities fell 49% after the dot-com bubble imploded and 57% after the 2008 financial crisis.
Long-term Treasurys are experiencing one of the most extreme collapses in history, compared to previous bond market collapses. The losses are over twice as large as those seen in 1981 when 10-year yields neared 16%.
This crash occurred as former Federal Reserve chair Paul Volcker battled unprecedented inflation and drove the federal funds rate to approximately 20%.
While interest rates remain well below that level today, the central bank’s aggressive shift toward monetary tightening in the post-pandemic era has triggered a similar bond market sell-off. And traders have continued to sell amid concerns of a resurgence in inflation, while a flood of Treasury issuance this year has also exerted downward pressure on bond prices.
As a consequence, long-term yields have reached their highest level since 2007, with the 30-year note surpassing 5% for the first time in decades. Investors anticipate a similar trajectory for the 10-year, which is currently hovering just above 4.7%. Notable investors, including Bill Ackman, Ray Dalio, and Bill Gross, anticipate that the 10-year yield will reach 5% in the near future.
