Global Bonds Lose $1.7 Trillion In November, Worst Monthly Meltdown On Record

Tyler Durden's picture

In early October, when speaking before the NY Fed, Bridgewater's Ray Dalio made a prophetic warning: a 1% rise in yields from near-record low level would trigger "the worst decline in bonds since the 1981 bond market crash." Less than two months later he has been proven right because while we have yet to see a move quite as large as the one Dalio envisioned, the November surge in global yields has already resulted in the worst monthly loss in the Bloomberg Barclays Global Aggregate Total Return Index, which lost 4% in November, the deepest slump since the gauge’s inception in 1990, and equivalent to $1.7 trillion in losses to $45.1 trillion.

Over the past two months, the cumulative loss in the index's market value is now a massive $2.8 trillion leading leading Bloomberg to declare that "the 30-year-old bull market in bonds looks to be ending with a bang."

The conventional wisdom behind the move is by now familiar: hopes for U.S. economic momentum and Donald Trump’s election win,  with promises of tax cuts and $1 trillion in infrastructure spending, have spurred investors to dump debt that was offering near-record-low yields and pile into stocks.

Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to start raising interest rates -- and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may be buying fewer sovereign securities going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to record highs.

“A lot of people are beginning to think that it is the end of the bull rally,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14 billion. U.S. 10-year yields may rise to 2.7 percent in January, Bridges said. “The trend is your friend.”

While the market's fixation has been on recent equity market gains, the reality is that these have been more than offset by mark-to-market losses across the bond world. According to Bloomberg, the record rout which wiped our $1.7 trillion from the global index’s value in November, is nearly three times greater than the gain in world equity markets’ capitalization which rose by a more modest $635 billion.

And, as noted this morning, the pain continues: the yield on 10-year U.S. notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.41% in early trading on Thursday. The average yield on the Bloomberg Barclays Global gauge climbed to 1.61 percent on Nov. 23, after touching a record low of 1.07 percent on July 5.

The rise in yields shows the limitations of the quantitative easing policies at the biggest central banks, Bridges said. Bonds will be especially vulnerable if the European Central Bank discusses reducing its debt-purchase program at its Dec. 8 meeting, he said.

With many investors having shifted out of risky assets and into duration in the past year, it remains to be seen how much of this loss will impact retail investor's investing psychology once month-end P&L statements are sent out at the end of the month.

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Oleg the Man's picture
Oleg the Man (not verified) Dec 1, 2016 7:08 AM

And Russia loses 20% of population. How do you like it?

B-Bond's picture

Invited to Trump Casino.

Oleg the Man's picture
Oleg the Man (not verified) B-Bond Dec 1, 2016 7:28 AM


MFL5591's picture

And 0 went into Gold?  Sick shit!

Oleg the Man's picture
Oleg the Man (not verified) MFL5591 Dec 1, 2016 7:30 AM

Laughing as crazy as fucking Goofy

Urban Redneck's picture

And where was gay little Ray Ray from Westport warning of the dangers of the Central Banks creating trillions of dollars in fictitious wealth through unrealized gains as they drove interest rate lower month after month with their mad printing?  

A little perspective is in order.  Nothing real has disappeared.  No real wealth has been lost.  The Wall Street Wankers are simply being hypocritical crybabies because their the free punch bowl now costs a few bps.

This supposed 1.7 trillion didn't even exist a few months ago, just like it doesn't exist now.  It's all a mirage, due to moving the goal posts each month. 

Arnold's picture

Hey my 8% expected return in my CalPers pension dissapeared.

That was a pretty fuckin' tangible asset to me.


-- Retired Toll Taker

ZH Snob's picture

and NIRP, of course, has nothing to do with this.

Oleg the Man's picture
Oleg the Man (not verified) ZH Snob Dec 1, 2016 7:48 AM

As always, brudder

Friedrich not Salma's picture

Oleg, interesting website,+1

Although I would have preferred to see the domain name in your link.

Oleg the Man's picture
Oleg the Man (not verified) Friedrich not Salma Dec 1, 2016 8:19 AM

It's just ethics. Many people doesn't like long links

overmedicatedundersexed's picture

when bond prices hit rock bottom, Mr Trump will tell his treasury sec to:

 BUY BUY BUY.. .gov debt will be bought for pennies and then retired in an american economy hitting 6% GDP growth.

the magic of America First solves alot of problems.

Arnold's picture

Shuda kept all that GM shit we bought.

new game's picture

ah, but those pensions anchored in treasuries and muni's. last laugh when pensionors see shrinkage and un funded liabilities are shrunk. all whilst the fed gets its' goal of 2 percent inflation. or is that an out of control 3+ percent. watch oil, the key to inflation...

NoDebt's picture

Any idiot can lose money in stocks.  But if you want to lose SERIOUS money, you need to be in bonds.


yogibear's picture

Bonds not the only thing being wiped out.

Just watch stocks.

The liberal globalist oligarchs intend on making it very painful for Trump.


Dirtnapper's picture

Yes, the Globalist are going to inflict pain on Trump in order to stop his actions that will counter their agenda.  But we are now in end game mode, it's all going to be hell.  If Clif High is correct, liquidity is the key word for the next six months and those of us who have been faithful in gold/silver/crypto (to be accurate, he only lists BTC) should see our reward in the next seven months as the dollar implodes.

FinanceNewb's picture

i've started to follow him here recently and with his predictions of earthquakes coming true i think he may be right...


Not My Real Name's picture

Yes, just like good ol' Clif was right about $38 silver by July. 

olebugger's picture

This is GREAT news for the trumpconomy. Yield curve crashes, GDP growth doubles. Nobody wants to own bonds of course.

You Only Live Twice's picture

The matter is more serious than it seems. If Bond yields are suffering, then that means that there is massive selling. With all US money as debt, that means that sooner or later, that inflation that has been spread through the Petrodollar System will return home. The troubles are bigger than they seem. This indicates a loss of faith in the US currency; really not good news.

Omega_Man's picture

just print and buy

falak pema's picture

How can Trumpy the tax cutter pretend he is anti global Oligarchy, when he names a yuuuge GS asset stripper and bankster hipster as head of Treasury.

This guy is like Geithner's and Hank Paulson's third resurrection.

Even Jesus Christ was not resurrected that often !

Could Trumpism be resumed in this "fake" populist face's emergence like that of the Joker  of true Oligarchy's new mantra ?

angry_dad's picture
angry_dad (not verified) Dec 1, 2016 9:01 AM

BROWN BEAR,  BROWN BEAR what do you see?

I see a debt collapse across the sea.