Bond market rout is so bad that double-digit losses are normal

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The European Central Bank’s decision to end quantitative easing marks the “end of an era” and bond market investors are feeling global pain.

on euro high-grade corporate bonds, Bloomberg debt indexes show. The more rate-sensitive US dollar and sterling credit markets have already been nursing double-digit negative returns in 2022.

The global pain follows a brief respite in May, when investors hoped that slowing economic growth would help ease price pressure. But inflation has been sticky and oil surged yet again, pushing the ECB to announce that it will stop adding to the world’s biggest bond-buying program this month and raise rates soon after.

Both investment-grade and junk bonds slumped in Asia on Friday, and along with peers in the US are on track for their first weekly loss since early May as bets increase that global monetary authorities must do more to beat down inflation.“The Fed will be raising rates, no chance of a pause, certainly not for the next 12 months,” Michael Spencer, chief economist and head of research at Deutsche Bank, said in an interview on Bloomberg Television.

 

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