The Blubber

The collapse in Treasury bonds now ranks among the worst market crashes in history, per BI.

The surge in bond-market sell-offs, propelling yields to notable highs, is now overshadowing some of the most severe market upheavals in past eras.

As reported by Bloomberg, losses on Treasury bonds with maturities of 10 years or more have reached 46% since March 2020, with the 30-year bond experiencing a steep drop of 53%.

These losses are nearly on par with stock-market declines witnessed during the most severe crashes in recent history, such as the 49% slump following the dot-com bubble burst and the 57% downturn in the aftermath of 2008.

In comparison to previous bond-market upheavals, long-term Treasurys are undergoing one of the most extreme reversals in history. The current losses are more than twice the magnitude of those observed in 1981 when 10-year yields approached 16%.

Back then, the crash coincided with former Federal Reserve Chair Paul Volcker addressing historic inflation by raising the federal funds rate to just under 20%. Although present interest rates remain well below that level, the central bank's assertive shift toward monetary tightening in the post-pandemic era has triggered a comparable downturn in the bond market. Ongoing selling by traders, driven by concerns about resurging inflation, coupled with a substantial issuance of Treasury bonds this year, has exerted further pressure on bond prices.

As a result, long-duration yields have surged to their highest levels since 2007, with the 30-year note surpassing the 5% threshold for the first time in decades. Investors anticipate a similar trajectory for the 10-year, which is hovering just above 4.7%. Notable investors, including Bill Ackman, Ray Dalio, and Bill Gross, anticipate the 10-year reaching 5% in the near term.