Global bond markets are on course for their worst year since 1999 after a global surge in inflation battered an asset class that is typically allergic to rising prices.
The Barclays global aggregate bond index — a broad benchmark of $68tn of sovereign and corporate debt — has delivered a negative return of 4.8 per cent so far in 2021.
The decline has been largely driven by two periods of heavy selling in government debt. At the start of the year, investors dumped longer-term government bonds in the so-called “reflation trade” as they bet that the recovery from the pandemic would usher in a period of sustained growth and inflation. Then, in the autumn, shorter-dated debt took a hammering as central banks signalled they were preparing to respond to high levels of inflation with interest rate rises.