08 Mar COTW: Its Been a Tough Couple of Years for U.S. Intermediate-Term Bonds
- U.S. intermediate-term bonds haven’t had a good couple of years. In 2022, the U.S. Bloomberg Aggregate Bond Index ended the year down 13%—the worst year since the inception of the Index in 1972. The decline can largely be attributed to inflation in the U.S. hitting the highest levels since the early 1980s, and the ensuing aggressive rate hiking cycle by the Federal Reserve combined with yields and credit spreads starting the cycle near record lows. U.S. bonds, as proxied by the Bloomberg U.S. Aggregate Bond Index, have gone from a yield of just 1.0% in 2020 to 4.81% as of the end of February.
- After posting a mammoth 3.1% in January, the U.S. Bloomberg Aggregate Bond Index wiped out nearly all of the gains it made in February, ending the month down 2.6%, as strong economic data showed inflation (currently at 6.4%) remaining well above the Fed’s 2% target. Including February, five of the Index’s worst monthly returns since 1993 have all occurred over the past 12 months.
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