Global bonds are down nearly 10 per cent from their peak, the biggest retreat from their peak in a decade

2022-06-02 0 By

Global bond markets are set to fall 10 per cent for the first time in more than a decade as soaring inflation pushes yields higher.The Bloomberg World Composite Index, a benchmark for government and corporate bonds, has fallen about 9.9 per cent from its peak in early 2021, marking the index’s biggest retreat from its peak since 2008, data show.Losses have been particularly severe in global credit markets.Asian dollar bonds have fallen about 10.5 percent from their peak in 2021, according to a Bloomberg index.Overall credit markets have also been showing signs of deterioration after weeks of outflows.The spread between investment-grade U.S. dollar and euro-denominated corporate bonds has surged more than 55 percent this year, hitting its widest level since mid-2020, according to Bloomberg indices.Exacerbating the decline in global fixed income markets is the fact that Treasuries offer inadequate protection as a safe haven amid global market turmoil.The fall in fixed-income markets largely reflects inflationary pressures around the world, reducing the appeal of low-yielding bonds.Russia’s invasion of Ukraine has pushed energy prices to their highest levels in more than a decade, adding to global inflationary pressures.While the central bank’s options are complicated by rising geopolitical tensions and market turmoil, the Fed is set to kick off its interest rate hike cycle this week as the US faces its highest inflation rate in four decades.Bond investors, whether government or corporate, now have few places to hide from high inflation.”Safe-haven bonds have been disappointing,” Morgan Stanley’s Matthew Hornbach and other researchers said in a report on Saturday.”Given that central banks — even the European Central Bank — are hawkish on rising inflation, we don’t think government bonds will perform very well as a safe haven.”This article is from the financial community