Global bonds are hitting fresh milestones of misery.
Strong U.S. data, a tighter-than-expected monetary trajectory, rising commodity prices and brewing wage pressures are conspiring to push Treasury yields to cycle-highs, hitting money managers of all stripes.
The value of the Bloomberg Barclays Multiverse Index, which captures investment-grade and high-yield securities around the world, slumped by $916 billion last week, the most since the aftermath of Donald Trump’s election victory in November 2016.
American high-grade obligations are down 2.53 percent in 2018 — a Bloomberg Barclays index tracking the debt has dropped in just three years since 1976.
“Bond investors have rarely seen losses like this over the past 40+ years,” Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, wrote in a blog post. “Any further moves higher in rates could lead to the worst year since 1976 in terms of overall bond returns.”
The 10-year Treasury benchmark closed at 3.23 percent Friday, the highest since May 2011, while core European and Japanese bond prices have fallen as investors bet the era of ever-looser monetary policy is firmly over.
“Interest-rate risk hits all high-quality bonds,” said Ben Emons, chief economist at Intellectus Partners LLC. “Higher growth means higher nominal and real rates.”
Money managers continued to flee the iShares 20+ Year Treasury Bond ETF to the tune of $1.06 billion last week, the largest exodus since November 2017 and the most of any U.S.-listed fixed income passive fund. It sank 3.6 percent during the five days ended Oct. 5, the worst week in nearly two years.