As year-end approaches, maybe the ‘year of the bond’ will be 2024?
The tagline from Wall Street was that 2023 was the year of the bond. Instead, fund managers are coming to terms with one of the toughest years ever.
Lacy Hunt, Hoisington Investment Management Co.’s 81-year-old chief economist, who’s been analyzing markets, Federal Reserve policy and the economy for around a half-century, says it’s been the hardest of his entire career.
At HSBC Holdings Plc, Steve Major says he was “wrong” to assume the US government’s growing supply of bonds didn’t matter. Earlier this month, Morgan Stanley finally joined Bank of America and moved to a neutral position on Treasuries.
“It’s been a very, very humbling year,” Hunt said. A 13% year-to-date loss for the firm’s Wasatch-Hoisington U.S. Treasury Fund comes on top of 2022’s 34% drop, data compiled by Bloomberg show.
Treasuries declined on Monday as concerns eased that the Israel-Hamas war would escalate to engulf other countries in the Middle East. The yield on 10-year US notes rose five basis points to 4.66%. That’s nearly 80 basis points higher than where it started 2023.
Last year’s steep losses were easier to explain to clients — everyone knows bond prices suffer when inflation is high and central banks are driving up interest rates.
The expectation in 2023 was that the US economy would crater under the weight of the sharpest run of hikes in decades — bringing gains for bonds on the expectation of policy loosening to come.
Instead, even as inflation slowed, jobs data and other key measures of the economy’s health remained strong, keeping the threat of faster price growth ever-present. Yields catapulted to highs not seen since 2007, putting the Treasury market on course for an unprecedented third year of annual losses.
And without the
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