Hi guys,

I'm new to bonds and have a simple question:

Why was 2022 the worst year for bonds, despite 2-Year and 10Year both rising to nearly 5%? The fed rate hikes are obviously the main reason. But I still don't understand why this would result in a loss rather than in a gain. If someones invested in the 2-year in October 2020 where yields were at 0.15% and received his money back in October 2022, where yields were at 4,6% - wouldn't that person had made a enormous net gain?

Thanks!

Bond price moves opposite to yield. Why would someone buy your bond when new ones pay more? You have to discount yours to make up for the lower interest rate. And if yield fall your bonds go up in value because people will pay a premium to buy the ones yielding more

I didn't know bond prices are moving opposite of yields.

How can I see the actually 2-year and 10-year bond price rather than yield? Since yields are the only thing I can see on charts. Are there any index symbols for it that are not ETF based?

Thanks!

patrick88 

I didn't know bond prices are moving opposite of yields. How can I see the actually 2-year and 10-year bond price rather than yield? Since yields are the only thing I can see on charts. Are there any index symbols for it that are not ETF based? Thanks!

Zn is 10 year. Zt is 2 year

patrick88 

Hi guys, I'm new to bonds and have a simple question: Why was 2022 the worst year for bonds, despite 2-Year and 10Year both rising to nearly 5%? The fed rate hikes are obviously the main reason. But I still don't understand why this would result in a loss rather than in a gain. If someones invested in the 2-year in October 2020 where yields were at 0.15% and received his money back in October 2022, where yields were at 4,6% - wouldn't that person had made a enormous net gain? Thanks!

@patrick88

I will explain your question by showing you the "US 2 year bond", as the same applies to the "US 10 year bond", only with different prices.

Please check the price of the "US 2 year bond" from October 2020 and compare this price with the value this "US 2 year bond" had in October 2022. What do you see?

The value of this bond was around 110.50 when bought and 102.50 when sold at expiration date. That is a loss of 7%. Now do the math on how much you collected on interest and you have the answer you are looking for.



When yields go up, the value of that security, in this case the US 2 year bond, goes down. You then should ask your self: Who is profiting most from such decisions to rise interest rates when ever they want?

Symple