Global bonds are in their first bear market in 76 years, based on two centuries of data, says Deutsche Bank

It’s been a terrible year for financial markets, and perhaps even more so when you weigh 2022 against more than two centuries of data.

Global bonds are now in their first bear market in 76 years, after falling 20% ​​from their 1786 highs, according to a Deutsche Bank study. The last time global bonds did so poorly was 1946, the year the United Nations first met in London after the end of World War II.

Read: A historic global crash in bond markets threatens to liquidate the world’s busiest trades, BofA says

Source: GFD, Deutsche Bank

Much of the brutal sell-off in global bonds that has pushed yields higher in developed markets is the expectation of much higher interest rates as central banks try to fight the highest inflation in 40 years. As financial market players rushed to factor in much higher interest rates, they aggressively sold off government bonds – pushing yields to multi-year highs, particularly in the US

Global government bonds have so far wiped out a decade of positive nominal returns based on a rolling 10-year return basis. “Through September 2022, this could be the worst rolling 10-year period for U.S. bonds in history,” researchers at Deutsche Bank said.

“What makes this current period even worse historically is that we are now seeing nominally deep losses that many countries have never experienced for an extended period outside of wars or defaults,” said Deutsche Bank researcher Jim Reid and Henry Allen, Luke Templeman and Adrian Cox.

On Monday, investors and traders continued the sell-off in US Treasuries, raising the politically sensitive 2-year TMUBMUSD02Y yield.
still above the highs of almost 15 years. The course for 2-year gilts TMBMKGB-02Y,
the UK counterpart of Treasuries surged over 4.5% as Bank of England Governor Andrew Bailey said policymakers would “not hesitate to change interest rates as needed” to bring inflation down to 2%. Global bonds are in their first bear market in 76 years, based on two centuries of data, says Deutsche Bank

Brian Lowry

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