Global bond markets suffered their worst slump since at least 1990, as investors braced for a rapid rise in interest rates from central banks that are battling the crisis. The highest inflation in decades.

The Bloomberg Global Composite Index, a broad measure of government and corporate debt, has fallen more than 11% since its peak in January 2021, surpassing the 10.8% drop during the 2008 financial crisis and marking the worst pullback in history. The index dates back to 1990.

The sell-off has accelerated since the start of the year as central bankers say they are determined to rein in inflation, which has surged to the highest level in decades – even as they take risks hinder economic recovery In progress.Federal Reserve Chairman Jay Powell hinted on Monday that the Fed is ready to take more aggressive action If necessary to control price increases after rate hike last week For the first time since 2018.

Markets are now pricing in at least seven further U.S. rate hikes this year.Bank of England rate hike Meeting for the third time in a row this month, it is expected to raise short-term borrowing costs above 2% by the end of 2022.

Even the European Central Bank has come up with faster-than-expected end its bond purchases planned at its most recent meeting. While the euro zone has been hit harder than many other global economies by the war in Ukraine, policymakers are still focused on record inflation, which comes amid a hawkish signal.

“It’s a very different world for bond investors,” said Mike Riddell, senior portfolio manager at Allianz Global Investors. “For the past 20 years, we have lived in a world where central banks looked to ease policy once growth started to falter. Now they are determined to tighten, even if it threatens to lead to a recession.”

U.S. Treasury Markets – Worst Month Ever November 2016 — bore the brunt of the recent sell-off. U.S. two-year Treasury yields, which are highly sensitive to expectations about the path of short-term interest rates, climbed to a three-year high of 2.2% this week, up from 0.73% at the start of the year. Two-year U.S. Treasury yields are on track for their biggest quarter since 1984 gain.

Longer-term yields have also risen, albeit at a slower pace, largely due to rising inflation expectations, making it less attractive to own securities that provide a fixed income stream long into the future. U.S. 10-year Treasury yields hit 2.42 percent on Wednesday, their highest since May 2019.

Bonds in Europe have followed suit, while even Japanese government bonds — with low inflation and a central bank expected to buck a global hawkish trend — have posted losses this year.

Adding to the pain for investors, corporate bonds suffered even more, widening the extra yield, or spread, they offered relative to government bonds.

“The bleakest scenario for a credit investor is that both interest rates and credit spreads are against you,” said Tatjana Greil Castro, co-head of public markets at Muzinich & Co. “That’s what we’re experiencing right now.”

The spread on Ice Data Indices, a measure of high-grade European corporate debt, has widened to 1.45 percentage points from 0.98 percentage points at the end of last year. The equivalent US spread has widened from 0.98 percentage points to 1.31 percentage points.

“Rates have moved higher across jurisdictions. You can’t just say ‘we’re going to focus on Europe or we’re going to focus on the UK’. There’s nowhere to hide geographically,” says Greer Castro

The loss of the safest form of government debt has also been accompanied by a pullback in the stock market. Major indexes, including the S&P 500, are still lower so far this year, even as stocks have recovered most of their losses since Russia’s invasion of Ukraine.

For some investors, the moves have again questioned the traditional role of bonds as a balancing force in portfolios, which tends to bounce back when riskier assets suffer losses, such as 60% of stocks and 40% of bonds. The classic “balanced” portfolio.

“It’s a huge challenge for the 60-40 model,” said Eric Fine, Van Eck’s portfolio manager. “All bond funds have outflows, including Treasury funds. Investors haven’t experienced it, analysts haven’t experienced it, it’s a new paradigm.”