Bond Fund Managers Face Third Year of Losses Amidst Rising Bond Yields

Bond fund managers are experiencing their third consecutive year of losses, a phenomenon not seen in roughly 40 years. This is due to the relentless strength of the U.S. economy, which has pushed bond yields to their highest levels in over a decade. In 2023, investors have started to return to the bond market, attracted by the increase in yields that has caused significant challenges for bond funds. Both U.S. mixed bond funds and European funds are expected to record negative returns for the third year in a row. Government bond funds have fared even worse, facing three consecutive years of losses in both the U.S. and Europe. The yield on the 10-year U.S. Treasury note is set to increase for the third year in a row, a trend not seen since the early 1980s. While bond fund managers find solace in the fact that higher yields are now more appealing to investors than three years ago, some investors remain cautious and prefer money-market funds. [884b0239]

Many of the world’s biggest bond funds are facing their third straight year of losses for the first time in roughly 40 years, as a relentless U.S. economy sends bond yields to their highest levels in more than a decade. Investors are loading up on bonds again in 2023 after bailing out of the market last year, drawn in by the same run-up in yields that has caused so much pain. U.S. mixed bond funds and European funds are on track for a third year of negative returns. The yield on the 10-year U.S. Treasury note is on track for its third consecutive annual increase for the first time since the early 1980s. Bond fund managers find consolation in the fact that yields are now more attractive to investors than three years ago, and interest income can keep bond fund returns positive even if prices fall further. [d77b1cc5]