The Global Aggregate Index published by Bloomberg closed out the month of November 2022 on a positive note of 4.7%. The index is a broad measurement of the worldwide performance by investment grade bonds, whether sovereign, corporate or even securitised. This net positive monthly performance is just a few basis points shy of the numbers for December 1991, September 1998 and September 2003, and second only to December 2008 among the top 32 years recorded.
On the surface, this is a fine monthly performance, but it conceals a horrific 2022. Despite the abrupt rebound, the Global Aggregate is, in fact, headed for its worst year, with a negative performance of more than 15%, relegating the 5% loss in 2000 or 2005 to a “friendly” correction. And 1994, known as the year of the “bond crash”, had itself ended on a smooth note.
We know why the bond markets are in a panic: runaway inflation in most economic regions, bottlenecks to produce more and faster, public deficits exploding in the developed economies, aggressive central banks that have all been “Volckerised”… It’s an explosive cocktail.