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/biz/ - Business & Finance

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53485362 No.53485362 [Reply] [Original]

FACT: In 2022 US bonds saw their worst year since the late 1700s

why?

>> No.53485401

Imagine that the very institution that creates money buys the bonds of the government that issues them. Now imagine that they suddenly not only stop doing so, but also sell the very bonds they used to buy. What do you think happens to the price of said bonds in this scenario?

>> No.53485415

>>53485362
Because I bought some

>> No.53485607

>>53485415
kek

>> No.53485649

>>53485362
Convexity, bond price sensitivity relative to the rate of change in interest rates

duration sensitivity increases when yields move against a lower baseline, i.e. 0.05% -> 1% is a 20x in yield even though it only went up 5bp. For someone who hyperleveraged at near 0% rates and didnt hedge out duration risk, their debt servicing costs increase exponentially. It takes less movement in yields to cause debt servicing costs to rapidly change.

>> No.53485663
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53485663

>>53485649
>

>> No.53485748

>>53485401
>>53485649
thanks frens

>> No.53485765

>>53485362
Because the federal reserve did the fastest rate hike cycle in history. Bonds haven't yielded this much in over a decade, so 10 years worth of bonds were instantly obliterated. This helped accelerate the stock market crash because everyone uses bonds as collateral for margin. Bonds go down -> margin evaporates -> sales happen to avoid margin calls.

>> No.53485773

>>53485748
No problem, brother. Not often that anyone brings up bonds on /biz/

>> No.53486178

Short the United States of America