Every cloud has a silver lining, and all that. Yes, the government bond market is on course for its worst year since 1865, according to Bank of America.
“It has been a grim environment overall,” as Andrew Balls, Pimco’s global chief investment officer for fixed income, drily put it at the end of last month. “This has not been a particularly fun period for anyone.” Quite. Sky-high inflation and rapidly tightening monetary policy are not a friendly mix for most asset classes.
But the happy news is that the ugly drop in bond prices has finally slayed Tina — the There Is No Alternative mantra that has dominated financial markets, particularly since the start of the pandemic. Under this mindset, investors have for years convinced themselves it makes sense to buy ever riskier assets in search of decent returns because so-called core bond yields, on debt issued by countries with rock-solid credit scores, have been so low. Tina made me buy growth stocks, Tina made me buy cryptocurrencies, and so on.