- Longer-duration bonds have plummeted in recent weeks, with key yields nearing 5%.
- The rout means 10-year US Treasury prices have now plunged 46% since March 2020, per Bloomberg.
Longer-term bond prices have cratered in recent weeks, turning an already-rough period for the asset class into a rout that rivals some of the worst-ever US financial-market crashes.
Ten-year Treasury notes have plummeted 46% since March 2020, according to data from Bloomberg, while 30-year Treasurys are down 53% over the same period.
Stocks last suffered losses of that magnitude 15 years ago, when the collapse of Lehman Brothers and the 2008 financial crisis led to the benchmark S&P 500 index plunging 48% in the space of six months.
Investors' belief that the Federal Reserve will hold interest rates at their current level well into 2024 in a bid to kill off inflation has led to bond yields, which move in the opposite direction to prices, soaring over the past two months, with the key 10-year yield approaching 5%.
Long-duration debt's massive plunge has had a knock-on effect on stocks, with the S&P 500 and Nasdaq Composite each down around 7% since the start of August. The Dow Jones Industrial Average has shed 2,500 points over the same period, wiping out all its gains year-to-date.
Even before the recent rout, bonds' rough stretch since 2020 had wobbled major financial institutions, with Silicon Valley Bank collapsing in March after its disclosure of a $1.8 billion loss on its fixed-income portfolio led to customers pulling their money from the California lender.
There were some signs of relief Wednesday, though, with 10-year yields pulling back from 16-year highs after fresh private payroll data signaled a softer-than-expected jobs market. Traders believe the figures could encourage the Fed to wind down its tightening campaign early.