Global bonds are in first bear market in 76 years based on two centuries of data, says Deutsche Bank

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It’s been a terrible year for the financial markets and perhaps even more so when you weigh 2022 against more than two centuries of data.

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According to research by Deutsche Bank in 1786, global bonds are now in their first bear market in 76 years, having fallen 20% from their peak. The last time global bonds performed so poorly was in 1946, the year of the first session. The United Nations was organized in London after the end of World War II.

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ReadingA historic global bond-market crash threatens to liquidate the world’s most crowded trades, says BofA

Source: GFD, Deutsche Bank

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Much of the brutal sell-off in global bonds, which has driven yields in developed markets up, is expected of much higher interest rates as central banks try to combat the highest inflation in 40 years. As financial-market players rush to factor in much higher rates, they have aggressively sold off government bonds – pushing yields to several-year highs, particularly in the US.

Global government bonds have eroded a decade of positive nominal returns, based on rolling 10-year returns. “By the end of September 2022, this could be the worst rolling 10-year period for US bonds in history,” said Deutsche Bank researchers.

Deutsche Bank researcher Jim Reid, Henry Allen, said, “What makes this current period historically even worse is that we are now witnessing deep losses in nominal terms, which, for many countries, are the result of war or default. There has never been a sustained period outside before.” , Luke Templeman and Adrian Cox.

On Monday, investors and traders continued to sell Treasuries, lifting the policy-sensitive 2-year yield TMUBMUSD02Y,
4.315% or its highest level since August 14, 2007. Meanwhile, the rate TMBMKGB-02Y on the 2-year gilt,
The UK equivalent of the Treasury, the Bank of England soared above 4.5% as Gov. Andrew Bailey said policymakers would “not hesitate to change interest rates as necessary” to bring inflation down to 2%.

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