Global bond markets have suffered unprecedented losses since peaking last year, as central banks including the Federal Reserve look to tighten policy to combat surging inflation.
The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008.
That’s a blow to money managers accustomed to years of consistent gains, backstopped by loose monetary policy. The slump also poses a particular threat to the expanding elderly population in many major economies, given retirees are often heavily reliant on fixed-income. Rising inflationary pressure around the world, amid surging commodity prices following Russia’s invasion of Ukraine, is also reawakening concerns about the ability of the global economy to weather any sustained period of higher financing costs as the pandemic drags on in many places.