Navigating the Storm: Long-Term Bonds Face a 46% Plunge Since May 2020


The bond market is in turmoil, and the reverberations are being felt across the financial sector. Long-term bonds, particularly those with maturities of 10 years or more, have experienced a significant decline in value, reminiscent of historical market crashes. In this blog post, we will explore the reasons behind this dramatic fall in bond prices, its impact on banks and hedge funds, and what investors can expect in the coming months.

Navigating the Storm: Long-Term Bonds Face a 46% Plunge Since May 2020

Long-Maturity Bonds: A Dismal Performance

The bond market has witnessed a tumultuous period since May 2020, with losses in long-maturity bonds nearing historic levels. The 10-year bond, in particular, has plummeted by a staggering 46% since its peak in March 2020, a decline comparable to the bursting of the dot-com bubble in 2000. This sharp drop in bond prices has raised concerns among market participants and investors alike.

Banks and Hedge Funds in Distress

The repercussions of this bond market rout are not limited to investors; they are reverberating throughout the financial industry. Bonds set to mature in 10 years or more have experienced a severe 46% decline, while 30-year bonds have seen an even more substantial plunge of up to 53%. To put this into perspective, during the 2007-2009 financial crisis, equities dropped by 57%. These statistics underscore the magnitude of the current bond market turmoil.

The Impact on Global Markets

One crucial aspect to consider is the cascading effect of the slump in Treasury bonds with longer maturity dates on global markets. As bond prices fall, yields rise, which can serve as a benchmark for other interest rates. This, in turn, leads to higher borrowing costs in the broader economy. Banking institutions, in particular, rely on low-cost borrowing to fund their operations. As borrowing costs mount, banks and financial institutions may face reduced profitability and potential margin calls.

The Role of the Federal Reserve

The current losses in long-maturity bonds have surpassed previous records, including the historic 1981 slump when 10-year yields reached nearly 16%. They also exceed the average decline of 39% seen in seven US equity bear markets since 1970. This includes the 25% drop in the S&P 500 when the Federal Reserve began raising interest rates from near-zero levels.

A significant turning point was the Federal Reserve’s hawkish stance in 2022. For years, investors favored longer-dated bonds as central banks globally slashed interest rates. However, escalating inflation pressures and the subsequent shift towards hawkish monetary policies changed the market dynamics abruptly.

Looking Forward

The question on many investors’ minds is whether there is a bottom in sight for long-maturity bonds. Hedge fund manager Harris Kupperman suggests that as long as 10-year Treasury bonds remain inverted relative to short-term bonds, there may be no bottom in sight. He even suggests that yields could rise as high as 6% or more. The current yield on the 10-year Treasury stands at 4.7%, the highest level since 2007.


The bond market’s recent turbulence, especially in long-maturity bonds, has created significant challenges for investors, banks, and hedge funds. As the Federal Reserve takes a hawkish stance and inflation concerns persist, the future remains uncertain. Investors should exercise caution and consider diversifying their portfolios to mitigate risks. In these uncertain times, staying informed and seeking professional financial advice is crucial for making sound investment decisions.,This article is an original creation by If you wish to repost or share, please include an attribution to the source and provide a link to the original article.Post Link:

Like (1)
Previous October 6, 2023 7:20 pm
Next October 9, 2023 12:57 pm

Related Posts

  • Bond Market Points to Fed Standing Firm in Battle Against Inflation

    Recent economic indicators have been pointing to a growing concern over inflation. In response, the Federal Reserve has taken a firm stance against inflation and is committed to suppressing inflationary pressures. The bond market has been reflecting this commitment, providing insight into the Fed’s determination to fight inflation. Fed’s Commitment to Combat Inflation Unwavering The Federal Reserve has been steadfast in its commitment to combat inflation. This commitment is reflected in the Fed’s recent decisions to keep interest rates low and to continue its quantitative easing program. In addition, the…

    January 21, 2023
  • Navigating the End of Interest Rate Hikes: Top 5 Long-Term Bond ETFs to Invest In

    Introduction As the market anticipates the end of interest rate hikes, it’s time for investors to consider shifting their focus to long-term bond ETFs. With the Federal Reserve signaling a possible pause in rate increases, long-term Treasury bonds are poised to benefit from a potentially lower interest rate environment. This article will discuss the benefits of investing in long-term bond ETFs and introduce the top five long-term Treasury ETFs to consider, including TLT, EDV, SPTL, VGLT, and BLV. Why Long-Term Bond ETFs? Long-term bond ETFs are a solid investment option…

    March 19, 2023
  • The Inverse Relationship of Bonds and Stocks: Understanding the Benefits of Bond Investment During Economic Downturns

    “Understanding the Relationship Between Bonds and the Stock Market: Why Bonds Tend to Perform Oppositely and Why They are a Good Investment During a Recession” Bonds and stocks are two of the most popular forms of investments, and they are often considered to be inversely related. This means that when stocks are performing well, bonds tend to perform poorly, and vice versa. In this article, we will explore the reasons behind this inverse relationship and why bonds are a good investment during a recession. One of the main reasons for…

    January 24, 2023
  • An In-depth Look at Bond ETF – SPTL: Analysis and Investment Recommendations

    Introduction The SPDR Portfolio Long-Term Treasury ETF (SPTL) is an exchange-traded fund (ETF) designed to provide investors with exposure to long-term U.S. Treasury bonds. This article offers a comprehensive overview of SPTL, including its composition, historical performance, and factors that may impact its future performance. Additionally, we will provide investment recommendations for those considering adding SPTL to their investment portfolios. Composition of SPTL SPTL seeks to track the performance of the Bloomberg Barclays Long U.S. Treasury Index, a market-weighted index consisting of U.S. Treasury bonds with maturities of 10 years…

    March 18, 2023
  • Navigating the Investment Landscape: A Look at Infrastructure, Crypto and Bonds

    When it comes to investing $1 million, there are many options to consider. One popular choice is infrastructure investing, which involves investing in physical assets such as roads, bridges, and power plants that are essential to the functioning of a society. Another option is investing in cryptocurrency, which has seen tremendous growth in recent years but also carries a high degree of risk. A more conservative option is investing in bonds, which offer a steady stream of income but with less potential for large returns. Infrastructure investing is becoming increasingly…

    January 20, 2023
  • Why I Prefer to Invest in Bond Than Stock in 2023?

    Investing is an important part of our lives and in the current world, it is something that no one should ignore. In the past few years, the stock market has become more volatile, making it difficult to predict the future. On the other hand, bonds are a more reliable option for investments in 2023. In this article, I will discuss why I prefer to invest in bond than stock in 2023. First, let’s look at the benefits of investing in bond over stock. Bonds are generally less risky than stocks,…

    January 17, 2023
  • How to Buy Treasury Bills as Some Yields Reach 5%

    With yields on some Treasury bills now reaching 5%, these assets have become increasingly attractive to investors. However, there are important aspects of the purchasing process that investors should be aware of, according to experts. Treasury bills, also known as T-bills, are short-term debt securities backed by the U.S. government that are nearly risk-free. These securities have maturities ranging from four to 52 weeks and pay interest at maturity, which is exempt from state and local taxes. As a result of the Federal Reserve’s series of rate hikes, T-bills have…

    February 25, 2023
  • Unlocking Opportunities: Navigating the Fast-Growing Asian Convertible Bond Market

    Let’s dive into the exciting and fast-growing world of Asian convertible bonds. As a bond expert, I will offer my perspective on the attractive opportunities in this market, especially in the context of economic growth, global supply chain shifts, and the transition to renewable energy. CHART 1: Worst MSCI Asia ex Japan (and Hang Seng) month compared to Refinitv Asia ex Japan Convertible bonds, which blend characteristics of debt and equity, present appealing opportunities for companies seeking more cost-effective financing tools as the era of ultra-low interest rates draws to…

    June 23, 2023
  • Bond Investing: Understanding Bonds, Investment Strategy, and Benefits

    Introduction to bonds A bond is a debt instrument in which an investor loans money to an entity (typically corporate or governmental) and receives periodic interest payments, or coupons, over the life of the bond. At maturity, the entity returns the principal to the investor. Bonds are often used by companies to raise capital for expansionary projects or other purposes. When a company issues a bond, it is essentially borrowing money from investors and promising to repay the principal plus interest (coupons) over a set period of time. Bonds are…

    February 6, 2023
  • Why 2023 Could be a Breakout Year for the Bond Market

    As we look forward to the new year, many investors are wondering what the bond market will hold in store for them in 2023. While it’s impossible to predict the future with 100% certainty, there are a number of indicators that suggest that 2023 may be one of the best years for the bond market in over a decade. One of the biggest reasons for this is the current state of the global economy. Despite the ongoing COVID-19 pandemic, many experts believe that the global economy will begin to rebound…

    January 25, 2023

Leave a Reply

Your email address will not be published. Required fields are marked *