Bond Investors Face Unexpected Losses in 2022

It was a rough year for bond investors in 2022, according to the Barclay’s U.S. Aggregate Bond Index. Last year was the worst year for global bonds since 1976, with a 13% drop.[0] Bond prices were particularly affected by the aggressive raising of interest rates by the US Federal Reserve and other major central banks, as they tried to contain inflation.

Inflation expectations were the primary cause of the market downturn.[1] The Cleveland Federal Reserve Bank’s Center for Inflation Research estimates that US inflation over the next 10 years is 2.27% per year.[2] This means that holders of longer-dated bonds were hit hardest, as the increase in interest rates was at its highest since the 1980s.

The interest rates offered on I bonds are recalculated every six months, based on inflation rates.[1] This means that I bond holders could see their returns halved should the Fed succeed in reducing inflation to a more typical 2% interest rate.[1] The inflation data from October, November, December and January suggest a lower rate will be announced in May, but two more months of information will be needed before a more precise estimate can be made.[3]

0. “The Worst Bond Year Ever Was 2022 – What Does That Mean For You?” Forbes, 9 Feb. 2023,–what-does-that-mean-for-you

1. “This Low-Risk 7% Investment Was All the Rage in January. Here’s What You Need to Know.” The Motley Fool, 16 Feb. 2023,

2. “Buying bonds now is a smart money move even if the Fed keeps hiking rates. Here’s why.” MarketWatch, 14 Feb. 2023,

3. “You can buy I Bonds with your tax refund: What to know about rates, deadline” Detroit Free Press, 15 Feb. 2023,