{"id":49892,"date":"2023-08-18T00:58:43","date_gmt":"2023-08-18T04:58:43","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/treasury-market-returns-are-negative-again-why-this-time-for-bonds-looks-different-than-2022\/"},"modified":"2023-08-18T00:58:45","modified_gmt":"2023-08-18T04:58:45","slug":"treasury-market-returns-are-negative-again-why-this-time-for-bonds-looks-different-than-2022","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=49892","title":{"rendered":"Treasury market returns are negative again. Why this time for bonds looks different than 2022."},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002411394\" role=\"document\">\n<p>Yearly returns in the Treasury market slipped into negative territory this week as the market sold off on signs that the Federal Reserve may need to keep rates high for a while to contain inflation.<\/p>\n<p>While negative returns might stir bad memories of last year\u2019s shocking losses for bonds, stocks and nearly everything else, investors holding Treasury debt issued at 2023\u2019s higher yields might want to sit back and take stock.<\/p>\n<div class=\"paywall\">\n<p>\u201cThis is the top thing we hear,\u201d said\u00a0Ryan Murphy, director of fixed-income business development at\u00a0Capital Group, of evaporating returns in what\u2019s been a tough August. \u201cYou saw the worst bond market in 40 years last year. Investors, they are tired, and feel beaten up.\u201d<\/p>\n<p>Murphy\u2019s message to clients is this: \u201cIn bonds, you earn the money over time.\u201d And those dwindling bond returns since January? \u201cApproach it with a deep breath, and know this is going to work out in the end.\u201d  <\/p>\n<p>Capital Group\u2019s laid-back style and lack of \u201ca star CEO\u201d earned it recognition by Institutional Investor in March as \u201ca new bond leader\u201d without a king, in large part because it attracted $100 billion in funds over the past five years, or twice the total of its peers.<\/p>\n<p>Recent volatility in interest rates again zapped yearly gains in many bond funds, as Fed officials continued to warn that a roaring labor market and robust spending could keep inflation from receding to the central bank\u2019s 2% annual target.<\/p>\n<p>The spike in long-term bond yields makes older, lower-yielding securities look comparatively less attractive. That\u2019s reflected in the yearly return on a key Bloomberg U.S. government bond and note index, which turned negative for the first time since March (see chart), when several regional banks failed, stoking fears of a broader banking crisis.<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<p>          <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-inline\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<\/figure><\/div>\n<p>However, a look back at August 2022 shows the 10-year Treasury yield starting around 2.6%, according to FactSet.<\/p>\n<p>By contrast, Treasury bill yields<br \/>\n        BX:TMUBMUSD06M<br \/>\n       neared 5.5% on Thursday, or \u201cnorth of anything we\u2019ve seen over the past 15 years,\u201d Murphy said. And for investors looking to lock in longer-term yields, the 10-year Treasury rate<br \/>\n        BX:TMUBMUSD10Y<br \/>\n       touched 4.307% on Thursday, its highest level since November 2007, according to Dow Jones Market Data.<\/p>\n<p><strong>See<\/strong>: How BlackRock\u2019s Rick Rieder is steering his active fixed-income ETF as bond funds struggle<\/p>\n<p>\u201cIt\u2019s becoming more expensive for the government and companies to finance debt because of the rapid climb in rates,\u201d Murphy said of the drag of higher long-term interest rates. <\/p>\n<p>On the flip side, it\u2019s also been one of the best stretches for lenders and bond investors in terms of getting paid to act as creditors since the 2007-2008 global financial crisis, but without a U.S. recession \u2014 or at least not yet.<\/p>\n<p>What\u2019s also different from last year is that the Fed already jacked up interest rates to a 22-year high of 5.25%-5.5% in July, and has signaled it\u2019s likely nearly finished with hikes in this cycle.<\/p>\n<h2>Record cash on the sidelines<\/h2>\n<p>Murphy pointed to a mountain of cash on the sidelines, in the form of assets in money-market funds, as another potential stabilizer for markets.<\/p>\n<p>Assets in money-market funds hit a record $5.57 trillion for the week ending Wednesday, according to data from the Investment Company Institute.<\/p>\n<p>\u201cWhat\u2019s really interesting is that there\u2019s been two bursts of investors going into money-market funds. There was a big shift right at the onset of COVID, and another burst over the past 12-18 months since the beginning of the rate-hiking cycle,\u201d Murphy said. <\/p>\n<p>Looking back to 2008, he pointed to a similar buildup in money-market assets, and a roughly $1.1 trillion wall of cash subsequently leaving the sector, as financial assets began to recover in the wake of the financial crisis.<\/p>\n<p>\u201cWhat we did see, while not all of it, was a healthy amount went back into fixed-income in the following years,\u201d Murphy said.<\/p>\n<p>Stocks closed lower Thursday and were headed for another week of losses, with the Dow Jones Industrial Average<br \/>\n        DJIA<br \/>\n       2.3% lower on the week so far, the S&amp;P 500 index<br \/>\n        SPX<br \/>\n       down 2.1% and the Nasdaq Composite Index off 2.4%, according to FactSet.<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/treasury-market-returns-are-negative-again-why-this-time-for-bonds-looks-different-than-2022-aaf9a032?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yearly returns in the Treasury market slipped into negative territory this week as the market sold off on signs that the Federal Reserve may need to keep rates high for a while to contain inflation. While negative returns might stir bad memories of last year\u2019s shocking losses for bonds, stocks and nearly everything else, investors [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":49893,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-49892","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Treasury market returns are negative again. Why this time for bonds looks different than 2022. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Yearly returns in the Treasury market slipped into negative territory this week as the market sold off on signs that the Federal Reserve may need to keep\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=49892\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Treasury market returns are negative again. 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