The ongoing bear market in Treasury bonds is among the worst on record, but several sectors of the fixed-income market remain ports in a storm, based on year-to-date results through Thursday (Oct. 5) for a set of fixed-income ETFs.
“Bonds maturing in 10 years or more have slumped 46% since peaking in March 2020,” Bloomberg reports.
“Compared with previous bond-market meltdowns, long-term Treasuries are seeing one of the most extreme undoings in history. The losses are over twice as big as those seen in 1981 when 10-year yields neared 16%.”
“It’s quite something,” observes Thomas di Galoma, co-head of global rates trading at BTIG.
“To be honest with you, I had never thought I would see 5% 10-year notes ever again. We got caught in an environment post-global financial crisis where everybody just thought rates were going to remain low.”
Despite the bearish tailwinds blowing through the market, it’s not an across-the-board rout via a set of ETF proxies. Notably, a portfolio of bank loans (BKLN) is leading the field with a solid 8.5% return so far in 2023 through yesterday’s close (Oct. 5). Tied for second place this year: moderate gains of roughly 5% each for short-term junk bonds (SJNK) and floating-rate notes (FLRN).
The steepest losses in the bond market in 2023 are concentrated in long maturities, led by the near-12% slide in iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT).
When will the pain end for longer-dated bonds? The answer is tightly linked to how the Federal Reserve’s monetary policy evolves in the months ahead.
San Francisco Fed President Mary Daly dropped a tantalizing clue in a speech yesterday, advising that if the recent rise in Treasury yields persists, the central bank may no longer need to raise interest
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