Bonds had their worst first-half performance since George Washington was president, Vanguard says
The Bloomberg Global Aggregate Bond Index (unhedged), which measures the state of global bond markets, is down about 21% from a year ago.< /p>
To put that into perspective, a rout like this hasn't affected global fixed income investors since official data collection began in 1990.
Even the 10% drop during the global financial crisis has been surpassed.
Furthermore, the broad stock market index was down 23% on the year, mirroring the overall decline in equities. Since the launch of the aggregate bond index in the mid-1970s, we have not had a year in which equities and fixed income securities were down.
Bond markets have been hit hard by central bankers caught off guard by escalating inflationary pressures. Soaring inflation was driven by historically tight labor markets, rising commodity prices following the conflict in Ukraine and Covid lockdowns in China.
According to the source, Vanguard says bonds posted their worst first-half performance "since either before the Civil War or since George Washington was president."
Also read: This 7% yielding ETF was ravaged by war in Ukraine. Is it time to buy?
Why do bonds work so badly? There could be several reasons.
The sharp tightening of repricings Investors are currently pricing in rate hikes through the end of the year, with the so-called dot chart showing interest rates likely to hit 4.4% by December, above 3.4 % expected in June, and will continue to increase to 4.6% next year.< /p>
Wallet protection is becoming increasingly important High-quality fixed income investments often perform better in this climate as recessionary concerns mount.
The UK has entered a recession due to the possibility that Europe's energy supply will be cut off more abruptly than expected.
Demand from institutions must be strong After years of struggling with paltry returns, this year's dramatic rate hike is expected to drive strong demand from insurance and pension funds.
Many institutions will now be keen to lock in the recent rate hike to offset longer-term debt due to their favorable funding situation.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
The Bloomberg Global Aggregate Bond Index (unhedged), which measures the state of global bond markets, is down about 21% from a year ago.< /p>
To put that into perspective, a rout like this hasn't affected global fixed income investors since official data collection began in 1990.
Even the 10% drop during the global financial crisis has been surpassed.
Furthermore, the broad stock market index was down 23% on the year, mirroring the overall decline in equities. Since the launch of the aggregate bond index in the mid-1970s, we have not had a year in which equities and fixed income securities were down.
Bond markets have been hit hard by central bankers caught off guard by escalating inflationary pressures. Soaring inflation was driven by historically tight labor markets, rising commodity prices following the conflict in Ukraine and Covid lockdowns in China.
According to the source, Vanguard says bonds posted their worst first-half performance "since either before the Civil War or since George Washington was president."
Also read: This 7% yielding ETF was ravaged by war in Ukraine. Is it time to buy?
Why do bonds work so badly? There could be several reasons.
The sharp tightening of repricings Investors are currently pricing in rate hikes through the end of the year, with the so-called dot chart showing interest rates likely to hit 4.4% by December, above 3.4 % expected in June, and will continue to increase to 4.6% next year.< /p>
Wallet protection is becoming increasingly important High-quality fixed income investments often perform better in this climate as recessionary concerns mount.
The UK has entered a recession due to the possibility that Europe's energy supply will be cut off more abruptly than expected.
Demand from institutions must be strong After years of struggling with paltry returns, this year's dramatic rate hike is expected to drive strong demand from insurance and pension funds.
Many institutions will now be keen to lock in the recent rate hike to offset longer-term debt due to their favorable funding situation.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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