Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

The 10-year U.S. Treasury yield closed above 4.9% yesterday, its highest level since July 2007.

While that might not seem like a big deal to most

investors, 4.9% is not really a surprisingly high interest rate in the greater scheme of things.

What it means is that bond investors in longer dated treasuries have lost around half of their

money since early 2020.

A team of analysts at Bank of America are calling this the greatest bond bear market of all time.

The long-term Treasury ETF, which invests in US government debt maturing in at least 10 years,

is down 8.5% over the last month and is half

since its high in March 2020. That would be considered a terrible loss in the stock market,

which is at least expected to be volatile. It's a devastating loss for bond investors

who are typically seen as being risk-averse

investors seeking stable returns and income.

The current losses in long maturity debt more than double the losses that occurred in

1981 when Paul Volcker's campaign to end persistent inflation drove 10-year treasury yields to almost 16%.

Since 1945, there have only been three stock market drawdowns of 40% or more, the most recent

two being the bursting of the dot-com bubble and the financial crisis of 2007-2008.

So what's happened in the bond market is one of the ugliest losses in modern financial

history.

The financial press is describing these as paper losses, as if you hold on to the bonds

you bought at near zero interest rates,

you do eventually get the money that you put in back when the bonds mature.

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