Why bond-market investors are not panicking about the worst Treasury bear market in history

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‘Ripping the band-aid off’ this time should be preferable to investors because interest rates are now much higher to act as a margin of safety, says Ben Carlson

The ongoing rout in the world’s biggest bond market since 2020 is causing the greatest Treasury bear market of all time, but investors don’t seem to be panic about the selloff, said Ben Carlson, portfolio manager at Ritholtz Wealth Management.

“One of the strange parts about living through the worst bond bear market in history is there doesn’t seem to be a sense of panic,” Carlson wrote in his popular daily financial blog “A Wealth of Common Sense” on Friday. “… some people are concerned about higher interest rates but it feels pretty orderly all things considered.”

The continuous selloff in Treasurys proves some investors might be wrong in pricing in the peak in rates despite the bond-market crash fueled by a hawkish outlook from the Federal Reserve since late September. The bond bear market of the 1950s through the early 1980s, in which the yields went from 2% to 15% in a little over 30 years, was more “a death by a thousand cuts” as the source of those cuts was inflation. “Sure, annual nominal returns were positive at a little more than 2% per year, but inflation was in the 4-5% range over that period.”

 

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