NY Times on Big Decline in Bonds
The New York Times writes, "How to Endure the Big Decline in Bonds." They explain, "It's been a horrible start of the year for the bond market, the worst in decades. If you hold bonds in a mutual fund or exchange-traded fund, it's highly likely that your quarterly statement next month will show that you have lost money. Last week, I wrote about the market rout and about the signals that the bond market may be sending about the state of the economy. Many readers have asked for further explanation of what has happened and what, if anything, they should do about it. Here are some answers." The piece asks, "How bad are the bond market declines?" They reply, "Really, truly, historically bad. The most important measure of the overall investment-grade U.S. bond market is probably the Bloomberg Aggregate Bond index. It was down 6.66 percent this year through Thursday. How terrible is that? Well, Sebastien Page, the CIO for T. Rowe Price ... said the overall bond market's three-month performance is the worst since 1980. For Treasurys, it's the worst three months since at least 1926, when comparable data began to be available." The Times also asks, "Will interest rates keep rising?" They respond, "Short-term interest rates almost certainly will, because the Federal Reserve says so. It controls the federal funds rate, the rate that banks charge one another for overnight loans, which it increased by 0.25% on March 16, from nearly zero. The Fed has held rates extraordinarily low since the start of the Covid-19 pandemic in 2020 in an effort to jump-start the economy. Now, the Fed says it intends to keep increasing rates to combat inflation, which has gotten out of hand. Prices increased at an annual 7.9% pace in February, as measured by the Consumer Price Index. And the March numbers are likely to be even worse when they come out on April 12."
