US-Bondrutsch gleicht 1995 - auch in Erwartung weicher Landung

Another historic loss for US bonds

The US bond market has returned to the shocking decline experienced in 1995. This has been attributed to a combination of factors, including the Federal Reserve's aggressive interest rate hikes and anticipation of a soft landing for the economy.

In 1995, the Federal Reserve, led by Chairman Alan Greenspan, raised interest rates by a total of 3 percentage points in response to rising inflation. The bond market responded by selling off as investors feared a recession.

The similarities between 1995 and today's market are striking. The Federal Reserve has raised interest rates by 425 basis points this year, and the market is now pricing in a recession. As a result, bond yields have risen sharply, with the yield on the 10-year Treasury note reaching 4.2% this week, its highest level since 2008.

Why is the bond market so worried about a soft landing?

A soft landing is a scenario in which the economy slows down without falling into recession. The Federal Reserve is trying to achieve a soft landing by raising interest rates just enough to cool inflation without triggering a recession.

However, the bond market is worried that the Federal Reserve will not succeed in achieving a soft landing. If the economy does fall into recession, it will be very difficult for the Federal Reserve to lower interest rates to stimulate growth. As a result, bond investors are demanding higher yields to compensate for the risk of a recession.

What does this mean for you?

If you are a saver, the rising interest rates are good news. You will now earn more interest on your savings accounts and CDs.

If you are a borrower, the rising interest rates are bad news. You will now pay more interest on your loans.

If you are an investor, the rising interest rates are bad news for bonds. However, stocks may be a good investment as the economy slows down.