Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Widespread Losses For Bonds This Year, With Some Exceptions

By James PicernoBondsMar 25, 2021 07:40AM ET
Widespread Losses For Bonds This Year, With Some Exceptions
By James Picerno   |  Mar 25, 2021 07:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Holding bonds has been a mostly painful experience so far in 2021, although a few corners of fixed-income have escaped the damage, based on a set of proxy ETFs through yesterday’s close (Mar. 24).

The usual suspects, however, are seeing deep shades of red. The worst-hit sectors are long Treasuries. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) has tumbled 12.2% so far this year.

TLT Daily Chart
TLT Daily Chart

Animating the selling is the growing perception that the Federal Reserve’s remit is shifting to maximizing employment while de-emphasizing inflation control. That’s been a mostly academic change so far since inflation has been low in recent years and knocked lower by the pandemic. But Wall Street is anxious that as the coronavirus crisis fades, combined with aggressive fiscal stimulus and dovish central bank policy for the foreseeable, the potential is rising for higher inflation. If so, the prospect of a Fed that’s disinclined to pre-emptively maintain pricing stability is worrying the market.

“The market is still coming to terms with the fact that this Fed is going to be focused on maximizing employment and is going to let inflation run,” says Patrick Leary, chief market strategist and senior trader at Incapital. Yields are “still overall low enough for the Fed; whether that will change at some point and what those numbers are, we don’t really know,” he adds.

As usual with the perception of greater uncertainty and higher stakes, the crowd requires deeper discounting of risk assets as compensation. For bonds, that translates to lower prices and a commensurate rise in yields. The benchmark 10-year Treasury yield, for example, has risen sharply since last August, jumping to roughly 1.6% in recent days from last year’s trough of about 0.5%.

UST10Y Daily Chart
UST10Y Daily Chart

Although losses dominate bond returns this year, a few corners have bucked the trend. Notably, junk bonds are posting modest year-to-date gains. The top performer on our ETF fixed-income list: SPDR® Bloomberg Barclays Short Term High Yield Bond ETF (NYSE:SJNK), which is up 1.6% in 2021. iShares 0-5 Year TIPS Bond ETF (NYSE:STIP) are a close second-place winner this year (+1.3%), followed by SPDR® Bloomberg Barclays (LON:BARC) Investment Grade Floating Rate ETF (NYSE:FLRN), which is up fractionally (+0.3%). Invesco Senior Loan ETF (NYSE:BKLN) is the fourth-best winner this year, just barely, rising 0.1%.

US Bonds - ETF Performance YTD Total Return Chart
US Bonds - ETF Performance YTD Total Return Chart

The gains are the exception. The US investment-grade benchmark, based on Vanguard Total Bond Market Index Fund ETF Shares (NASDAQ:BND), is down 3.3% year to date.

The selling has abated in recent days, raising the possibility that the worst of the fixed-income rout has passed if not ended entirely. Indeed, BND rose for a fourth straight day yesterday, its longest stretch of daily gains since November.

BND Daily Chart
BND Daily Chart

Perhaps a period of relative stability for the bond market is coming. Or is this the calm before the next leg down? Unclear, although one analyst recommends maintaining a cautious outlook for fixed income.

“Bond yields rise until they break something, until they cause pain for borrowers,” says Carl Astorri, head of asset allocation at AustralianSuper Pty., which manages A$210 billion ($161 billion). “At the moment, we’re assuming that we’re entering, at the very least, a standard expansion phase of the cycle and quite possibly a kind of overheat or a boom.”

Widespread Losses For Bonds This Year, With Some Exceptions

Related Articles

Tim Knight
Bonds And Trendlines By Tim Knight - May 28, 2021

One thing’s for sure: the two channel lines I put down for the bonds (TLT) a while ago have been doing a yeoman’s job designating support and resistance levels.

Michael Lebowitz
Taper Is Coming: Got Bonds? By Michael Lebowitz - May 26, 2021

Taper Is Coming: Got Bonds? The solid economic recovery and easing of COVID restrictions lead us to believe a tapering of QE may not be far off. Further supporting our opinion,...

ING Economic and Financial Analysis
Federal Reserve: 0% Cash Back By ING Economic and Financial Analysis - May 24, 2021

So much liquidity has been pumped into the system that chunks of it are being offered back to the Federal Reserve, at zero percent. Perverse, as players are effectively shuffling...

Widespread Losses For Bonds This Year, With Some Exceptions

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email