It has been a tough 12 months for global bond investors, culminating in a rare bear market decline. And there are some signs of a relief soon.
Double-digit losses have been the norm for fixed-income investors in 2022, whether deeply concerned The term, type of loan, or industry of the issuer. More downturns may be on the horizon as central banks ramp up efforts to contain inflation at the highest in decades.
Pauline Crystal, portfolio manager at Kapstream Capital in Sydney, said: “There is still some pain to come. The Fed, in particular, is very committed to prioritizing inflation As opposed to worrying about a recession.”
Here’s a look at how the deficit is divided among different loan classes.
Treasuries globally have outperformed corporate bonds and securitized debt securities since early 2021. US government bonds have been under pressure of late as the Federal Reserve embarked on its most aggressive tightening campaign since the 1980s, and pledged to continue raising rates to kick back inflation. for your 2% target.
Government debt has been hit the most, as a large segment of the market was giving negative returns a year ago. Reserves of the sub-zero yield notes exceeded $15 trillion at the time, with investors paying to hold two-year Italian securities as well as 10-year German bonds and Japanese bonds.
In almost all sectors, the deficit in 2022 has been higher than the previous year. Energy-related bonds have suffered the smallest declines during the recession.
Bonds denominated in European currencies underperformed in 2022, raising the prospect of a recession following the continent’s energy crisis. Large volatility in currency markets driven by the highest inflation in decades in several countries has increased losses for investors tracking dollar portfolios.
Even short-term bonds have not been spared, although their loss of close to 10% is close to a 30% drop for notes with maturities of more than 10 years.
High-yield bonds have lost less than their investment-grade peers since early 2021. This suggests that investors are not pricing in a deep recession, and the notes offer some value as a buffer against rising benchmark rates.
The global rise in borrowing costs has rocked debt markets, with volatility rising to levels last seen in July 2020. With central banks yet to declare victory in the fight against inflation, bond investors may have to prepare for more turbulence ahead.
This story has been published without modification in text from a wire agency feed.
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