U.S. Treasury

• November 25, 2022
• realestate
• Announcements, Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate Finance, Recession, Your Real Estate Life

This year was one of the worst for bonds in history. While short-dated U.S. Treasury losses were limited to less than 10%, the 23% drop in annual returns of the 10-year note through last month was – according to Bank of America – the worst since the turbulent infancy of 1788; you must go back centuries in some cases to get anything nearly as bad as 2022 for ‘safer’ sovereign bonds. Bonds failed to offset plummeting equities and had one of their worst years in history as central banks ratcheted up interest rates to rein in decades-high inflation amid an energy shock. Banks have stepped back from buying mortgage bonds. So has the Federal Reserve, the largest investor in that market. Foreign buyers and money managers are curtailing purchases too. The gap between MBSs and the 10 yr. note was recently the biggest since the 1980s.

Recall that over the last couple of years fund managers were all about 60/40 (60% in stocks, 40% in fixed income) had its worst year in a century. It will be back though next year.