Worst year ever for F Fund?

[tsptalk]

The US bond market is on pace for its worst year in history with a loss of 10.7%.

Entering the year, the 2.9% decline for bonds in 1994 was the largest ever.

Source: https://twitter.com/charliebilello/status/1535617937729544193

What the heck was happening in 1982?

Source: https://twitter.com/charliebilello/status/1535617937729544193

 

[Bullitt]

I'd like to know as well. Quick look online and nothing goes past 1991. Probably would need a terminal to pull that data if it even exists.

 

[Bullitt]

Here's a historical 10 year chart where the yield is 14% in 1982 and then 10% in 1983. That's around a 30% move down in yields, so maybe that plus any coupons collected during the year explains it.

https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

 

[Boghie]

Here's a historical 10 year chart where the yield is 14% in 1982 and then 10% in 1983. That's around a 30% move down in yields, so maybe that plus any coupons collected during the year explains it.

https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

That is the answer. Dramatically declining inflation played a huge role as well. Annual inflation declined from 13.55% in 1980 to 10.33% in 1981 to 6.13% in 1982. It would decline to 3.21% in 1983. Bonds purchased in 1980 would have their value dramatically increased in 1982+. Think of it, your safe and secure bond that you bought in 1980 is earning some premium over 13.55% (or, you likely would not have bought it) and inflation is 6.13% and declining. Likewise, the FED rate was likely declining. Man, those bonds would be juicy and EXPENSIVE.

Bonds are priced by math - unlike equities. They can be influenced a little bit by panic and lust, but the pricing is mostly simple math. That is why they are trashed now. Now we actually have inflation, talk of recession, and the FED increasing interest rates to liquidate their bond holdings (the politicians took advantage of the FED and borrowed heavily using short term debt). This is hard to do, but I guess we wanted it. Bond buyers, like equity buyers, invest for the future. The future don't look so good.

GLHF