You are now following the news of global bonds falling to their lowest level in more than 30 years and now with the details
The index, which measures government and global corporate bond yields, fell to levels last seen in 2015.
The report pointed out that it is a remarkable transformation of the assets that underpin much of the global financial system. In recent years, investors have often lauded a multi-decade bear market, driven by years of low inflation and interest rates.
“However, this round ended abruptly in 2022 as inflation soared to multi-decade highs around the world, forcing central banks to embark on the most serious interest rate hikes since the 1980s.”
He explained, “When central banks raise interest rates, the new bonds that are put into the market offer a higher yield, and this prompts investors to get rid of existing bonds, which offer lower returns.”
The report pointed to the effects of the Russian-Ukrainian war on European bonds, which were particularly hard hit in 2022, as the event rocked the region, and high energy prices and political instability in Italy drove investors away from government and corporate debt in the region.
Analysts said the massive sell-off was exacerbated by the fact that many investors failed to appreciate the extent of the rise in inflation and thus the response of central banks.
Jim Solway, chief market strategist at the Stockholm Environment Institute, said: “The recent bond sale has been painful not only because interest rates are rising quickly but also because they have been rising more than markets had expected.”
But he added, “While higher interest rates can be painful for bondholders in the short term as current rates fall, the higher yields that result will ultimately mean higher inflows and returns for nominal income, all else being equal.”
The Federal Reserve, the world’s most important central bank, has raised interest rates by 2.25 percentage points since last March.
Investors expect to peak at nearly 4 percent in March 2023, according to Bloomberg data based on futures markets.
The Fed increases push the yield on 10-year US Treasury bonds, which sets the tone for borrowing rates and moves inversely to the rate, to an 11-year high of 3.5 percent in June, and was last traded at about 3.26 percent, up from 1.514 percent at the start general.
Investors are cautious about bond prospects, and an economic slowdown could drive up government bond prices as investors seek safe assets, while higher yields are also likely to attract some buyers. However, bond markets could incur more pain, if inflation does not decline as expected.