Global bonds have fallen into its first bear market in a generation, according to the Bloomberg Global Aggregate Total Return Index that tracks government and investment-grade corporate bonds, as the market came under pressure from the Federal Reserve’s strong commitment to fight 40-year high inflation even at the cost of a recession by enforcing every tools they have including interest rate hikes.
The Bloomberg Global Aggregate Total Return Index fell more than 20% from its peak in 2021, marking its biggest drawdown since 1990.
The U.S. Fed and ECB are on pace to raise interest rates by 75 basis points at their next meeting in September to tame red-hot inflation. US inflation in July was 8.5% while Eurozone inflation hit a new record high of 9.1% in August, fueled by rising energy prices.
Concerns over rising interest rates have hampered equity markets with bonds and stocks plunging at the same time.