Congratulations, you’ve lived through the greatest bond bear market in history, and it’s probably not over yet. From Tyler Durden at zerohedge.com:
There was a remarkable chart in the latest Flow Show note from BofA resident bear Michael Hartnett: after peaking in July 2020 and in the subsequent 28 months drawing down by a record 25%, this is now the single greatest bond bear market of all time!
Considering that BofA’s historical data goes back 236 years all the way to the founding of the republic, this is a jarring statistic, and a poignant reminder of the magnitude of the pain rippling through the financial world in the aftermath of an inflation shock and interest-rate surge that few saw coming… a shock which Deutsche Bank last week quantified as a $70 trillion Mark to Market hit to duration portfolios (while some may claim it’s not a loss unless you actually sell the bond, the truth is that any bond which is pledged as collateral in the repo markets or elsewhere is valued daily, and the cumulative haircut assuming all eligible duration was pledged is, drumroll, $70 trillion).
Worse, the historical bond bear market also underscores the growing angst in some corners of Wall Street about the increasingly shaky state of US government finances. As a reference, it took the US government just 18 days to add more than $500 billion dollars in debt after rising above $33 trillion for the first time: a run-rate of $1 trillion in new debt in under 2 months. Also, it took the US until March 1975 to accumulate its first $500 billion. It just did the same in 18 days.
