{"id":1243,"date":"2023-02-19T05:01:48","date_gmt":"2023-02-19T10:01:48","guid":{"rendered":"https:\/\/embarrdowns.com\/bond-investors-face-unexpected-losses-in-2022\/"},"modified":"2023-02-19T05:01:48","modified_gmt":"2023-02-19T10:01:48","slug":"bond-investors-face-unexpected-losses-in-2022","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/bond-investors-face-unexpected-losses-in-2022\/","title":{"rendered":"Bond Investors Face Unexpected Losses in 2022"},"content":{"rendered":"

It was a rough year for bond investors in 2022, according to the Barclay\u2019s U.S. Aggregate Bond Index. Last year was the worst year for global bonds since 1976, with a 13% drop.[0]<\/a><\/sup> 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. <\/p>\n

Inflation expectations were the primary cause of the market downturn.[1]<\/a><\/sup> The Cleveland Federal Reserve Bank\u2019s Center for Inflation Research estimates that US inflation over the next 10 years is 2.27% per year.[2]<\/a><\/sup> This means that holders of longer-dated bonds were hit hardest, as the increase in interest rates was at its highest since the 1980s. <\/p>\n

The interest rates offered on I bonds are recalculated every six months, based on inflation rates.[1]<\/a><\/sup> 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]<\/a><\/sup> 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]<\/a><\/sup><\/p>\n

0. <\/span>“The Worst Bond Year Ever Was 2022 \u2013 What Does That Mean For You?” Forbes, 9 Feb. 2023, https:\/\/www.forbes.com\/sites\/andrewrosen\/2023\/02\/09\/the-worst-bond-year-ever-was-2022–what-does-that-mean-for-you<\/a><\/a><\/p>\n

1. <\/span>“This Low-Risk 7% Investment Was All the Rage in January. Here’s What You Need to Know.” The Motley Fool, 16 Feb. 2023, https:\/\/www.fool.com\/the-ascent\/personal-finance\/articles\/this-low-risk-7-investment-was-all-the-rage-in-january-heres-what-you-need-to-know<\/a><\/a><\/p>\n

2. <\/span>“Buying bonds now is a smart money move even if the Fed keeps hiking rates. Here’s why.” MarketWatch, 14 Feb. 2023, https:\/\/www.marketwatch.com\/story\/buying-bonds-now-is-a-smart-money-move-even-if-the-fed-keeps-hiking-rates-heres-why-d76a06d5<\/a><\/a><\/p>\n

3. <\/span>“You can buy I Bonds with your tax refund: What to know about rates, deadline” Detroit Free Press, 15 Feb. 2023, https:\/\/www.freep.com\/story\/money\/personal-finance\/susan-tompor\/2023\/02\/15\/buy-i-bonds-tax-refund-interest-rates-deadline\/69784323007\/<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It was a rough year for bond investors in 2022, according to the Barclay\u2019s U.S. Aggregate Bond Index. Last year was the worst year for global bonds since 1976, with a 13% drop.[0]<\/a><\/sup> 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. <\/p>\n

Inflation expectations were the primary cause of the market downturn.[1]<\/a><\/sup> The Cleveland Federal Reserve Bank\u2019s Center for Inflation Research estimates that US inflation over the next 10 years is 2.27% per year.[2]<\/a><\/sup> This means that holders of longer-dated bonds were hit hardest, as the increase in interest rates was at its highest since the 1980s. <\/p>\n

The interest rates offered on I bonds are recalculated every six months, based on inflation rates.[1]<\/a><\/sup> 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]<\/a><\/sup> 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]<\/a><\/sup><\/p>\n

0. <\/span>“The Worst Bond Year Ever Was 2022 \u2013 What Does That Mean For You?” Forbes, 9 Feb. 2023, https:\/\/www.forbes.com\/sites\/andrewrosen\/2023\/02\/09\/the-worst-bond-year-ever-was-2022–what-does-that-mean-for-you<\/a><\/a><\/p>\n

1. <\/span>“This Low-Risk 7% Investment Was All the Rage in January. Here’s What You Need to Know.” The Motley Fool, 16 Feb. 2023, https:\/\/www.fool.com\/the-ascent\/personal-finance\/articles\/this-low-risk-7-investment-was-all-the-rage-in-january-heres-what-you-need-to-know<\/a><\/a><\/p>\n

2. <\/span>“Buying bonds now is a smart money move even if the Fed keeps hiking rates. Here’s why.” MarketWatch, 14 Feb. 2023, https:\/\/www.marketwatch.com\/story\/buying-bonds-now-is-a-smart-money-move-even-if-the-fed-keeps-hiking-rates-heres-why-d76a06d5<\/a><\/a><\/p>\n

3. <\/span>“You can buy I Bonds with your tax refund: What to know about rates, deadline” Detroit Free Press, 15 Feb. 2023, https:\/\/www.freep.com\/story\/money\/personal-finance\/susan-tompor\/2023\/02\/15\/buy-i-bonds-tax-refund-interest-rates-deadline\/69784323007\/<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":1242,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1243"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=1243"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1243\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/1242"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=1243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=1243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=1243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}