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The multidecade-long bull market in Treasurys has delivered rich gains to patient investors, but a 2021 bond-market selloff is likely inflicting significant pain on some market participants.
Though many were expecting yields to rise this year as the reflation narrative gained ground, few were prepared for the rapid rise in long-term bond yields since the start of this year. Yields move in the opposite direction of bond prices.
Read: Bond markets have ‘never been so sensitive’ to a Treasury yield surge
Stronger price pressures are one of the biggest concerns of fixed-income investors as they can wipe out the value of a bond’s interest payments.
The iShares 20+ Year Treasury Bond exchange-traded fund TLT, -0.75%, which focuses on bond maturities of over 20 years, is down 11.6% year-to-date.
That’s been matched by the surge in long-term Treasury yields. The 30-year bond rate TMUBMUSD30Y, 2.238% is at 2.27%, up around 63 basis points since the start of the year.
Some of this bond-market weakness has spilled over into the stock market in recent sessions, though equities remain near all-time highs. The Nasdaq Composite COMP, +0.54% is down 2.7% this week, while the S&P 500 SPX, +0.75% is slightly positive.
Market participants who scooped up such bonds last year when they were issued at much lower yields have watched them lose close to a quarter of their value, noted one analyst, who described the losses as “colossal.”
And Ben Breitholtz of Arbor Data Science calculated year-to-date losses for the 30-year bond were only comparable to 1980 and 2019, highly volatile years for the Treasury market.
