Higher interest rates reduce the number of willing borrowers, and debt buyers balk at falling prices.History is riddled with monetary policy mistakes where the Federal Reserve over-tightenedfroze counter-party trading in the credit markets as Lehman Brothers failed, in 2022, it might just be the $27 Trillion Treasury market.
Throughout the year, surging interest rates, the Russian invasion of Ukraine, soaring energy costs, inflation running at the highest levels in 40 years, and the extraction of liquidity from stocks and bonds whipsawed markets violently. Since 1980, bonds have been the defacto hedge against risk. However, in 2022, bonds have suffered the worst drawdown in over 100 years, with a 60/40 stock and bond portfolio returning a horrifying -34.4%of the economy.
Source: News Formal (newsformal.com)