A selloff in Treasurys has sent yields surging, leaving this ETF saddled with its worst return to start a calendar year on record

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It’s been a sluggish start to government debt so far in 2022, but the extent to which bonds have come under pressure to start the young year is perhaps the best example of a slowdown in exchange-traded funds, which are fixed-income funds. .

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Popular Benchmarks iShares Core US Aggregate Bond ETF AGG,
-0.29%,
The market-weighted index, which tracks Treasuries, agency loans, mortgage-backed securities and investment-grade corporates, is down 1.36% so far this week, which seems relatively mild unless you think about when to start declining. would be the sharpest decline. The first five seasons of the calendar for ETFs have been around since it was launched nearly two decades ago.

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The previous worst start to the year for the fund was 2009, according to Dow Jones Markets data, when it fell 1.29% in the first 5 sessions. AGG’s weekly skid was shaping up to be the sharpest since March 2020 when it fell 1.6%.

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The downside for the ETF comes as the 10-year yield TMUBMUSD02Y rose to 1.8% on Friday, adding to gains of nearly 24-basis points over the past four trading sessions. Meanwhile, the 30-year yield TMUBMUSD30Y, which was up 21 basis points on Thursday this week, rose above 2.1% as the Dow Jones Industrial Average traded in the DJIA,
-0.01%
and S&P 500 SPX,
-0.41%
The index remained mixed on Friday.

Bond yields rise when prices fall and vice versa.

The recent increase in rates, which has weighed on ETFs such as the AGG, follows minutes of the Federal Reserve’s December meeting, referring to the iShares ticker symbol, indicating the central bank’s monetary policy will be more aggressive. Given as it fights COVID-fuelled inflationary pressures.

Fixed-income investors are penciling in prospects for an interest rate hike by the Fed starting in March, when the central bank is on track to completely phase out its monthly asset purchases. Fed officials also said in the minutes that it may be necessary “to raise the federal-funds rate sooner or faster than participants had previously anticipated.”

On top of that, San Francisco Fed Chair Mary Daly said Friday that she can envision shrinking the balance sheet after “a hike or two.” His comments came a day after St. Louis Fed Chairman James Bullard, a 2022 voter on the rate-setting Federal Open Market Committee, said the first rate hike could come as soon as March.

Beyond AGG, the popular iShares 20+ Year Treasury Bond ETF TLT,
-0.72%
was also down sharply for the week, fell 3.9%. The weekly drop for TLT was the sharpest drop since January 8, 2021.

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