The Treasury bond market is experiencing a period of unprecedented turmoilaccording to recent data from Bespoke Investment Group.
For many investors, the close of the US bond market on Monday was a welcome respite after one of the most challenging developments for fixed income in years.
The data shows that annual returns on long-term Treasury notes and bonds over the past 20 years have never been worse.according to the Bank of America Merrill Lynch 10+ year US Treasury index.
Even in shorter periods, the results are discouraging, with returns over the past 2, 5 and 10 years exceeding 99% of the time. Only last year showed a return above the first historical percentile.
Bespoke revealed that annualized returns over the past 1, 2 and 5 years are now negative for long-term Treasury investors, with an annualized loss of 17.6% over the past two years.. Over the past 10 years, the return has not been very positive, reaching an average of 0.8% per year.
These numbers are a stark contrast to the past 45 years, where the average annual return on long-term Treasury bonds in periods of 1, 2, 5, 10 and 20 years exceeded 8%.
The unusually low yields have shaken investors’ view of bonds as a safe investment.. In fact, the selloff in stocks in recent weeks has been partly due to pressure in the bond market.
In this frame, Analysts have not identified a reason for this increase in returns.but it is clear that investors face a challenging outlook.
Uncertainty about how the bond market will recover and how it will relate to other asset classes will play an important role in how the markets behave in the coming months.