The bond-market sell-off, causing yields to surge, is surpassing previous market meltdowns in terms of losses. Since March 2020, Treasury bonds with maturities of 10 years or more have plummeted 46%, while the 30-year bond has plunged 53%. These losses are comparable to the stock-market losses witnessed after the dot-com bubble burst and the 2008 financial crisis. In fact, the current bond rout is even worse than the one seen in 1981 when 10-year yields approached 16%. This crash occurred during a period of historic inflation and tight monetary policy implemented by former Federal Reserve chair Paul Volcker.
Despite interest rates being lower today than in 1981, the central bank’s shift towards monetary tightening in the post-pandemic era has led to the ongoing bond-market sell-off. Traders continue to sell bonds due to concerns about rising inflation, and the significant issuance of Treasuries this year has also put pressure on bond prices. As a result, long-duration yields have reached their highest levels since 2007, with the 30-year note surpassing the 5% threshold for the first time in decades. Investors, including Bill Ackman, Ray Dalio, and Bill Gross, predict that the 10-year yield will reach 5% in the near future.
