Skip to content

What Happens When Bonds Lose Money

With the Federal Reserve focused on fighting inflation, rate hikes could mean losses for the “safe haven” side of your portfolio.
relates to What Happens When Bonds Lose Money

Illustration: 731

Early January is when many investors give their portfolios a checkup, and this year a sting awaits from the bond market. While equity returns dazzled in 2021, “safe” government bonds registered their first negative return since 2013.

Professional investors are of course accustomed to the idea that even so-called risk-free bonds lose money when interest rates rise—or are expected to rise. Those taking a diversified approach with their nest eggs are accustomed to think of Treasuries and high-quality bonds as conservative and safe investments that provide a consistent, if modest, positive return.