The Issue Of Raising Interest Rates By The Fed Has Been Hard To Predict.

In 1994, the catastrophic year of the bond market was known as the "debt market Massacre".

At that time, the Fed raised interest rates, resulting in a surge in bond yields and a heavy blow to fixed income investors.

Clearbrook Global Advisors, a New York investment consultancy, said in a white paper that the current market environment is likely to cause similar disasters.

The agency manages more than $30 billion of assets.

In a white paper, Clearbrook reviewed the background of the 1994 disaster: "in January 1994, the US economic expansion lasted for 34 months, and bond yields were at historically low levels, and inflation was also very mild.

There is little growth in wages and poor pricing power.

At that time, the Fed believed that inflation could rise rapidly.

"

Does that sound a bit like what it is now?

Then comes the disaster.

By the end of 1994, the yield of US Treasury bonds soared to 2.25%, and the yield of 10 - year treasury bonds rose from 5.92% to 7.84%.

This led to the "massacre" of the bond market.

"According to the basic mathematical principles of the bond market, the yield of the 10 year treasury bonds increased by 1.92%, multiplied by 10 years' duration, equals a loss of 19.2%.

In short, 1994 has become the most serious year in the history of bond market losses, "Clearbrook reported.

Clearbrook said the purpose of the report is not to frighten investors, but to point out possibilities.

"We need to be vigilant against the real possibility of a bond bubble and point out what preventive measures investors can take to reduce the losses that may happen during the disaster," Clearbrook wrote.

Clearbrook estimates that fixed income investors lost about $600 billion in 1994.

The bigger worry is not just that the current environment is similar to that of 1994, but that the amount of money invested in the bond market has more than two times compared to 21 years ago.

According to the white paper, the total amount of circulating bonds in 1994 was $10 trillion and 800 billion, and now it is $39 trillion and 200 billion.

The report points out: "think about it if

Or when other central banks commit policy errors, causing interest rates to soar, the magnitude of the market adjustment may be so frightening.

In addition, great changes have taken place in the financial market since 1994, manifested in the explosive growth of financial derivatives, the growth of low liquidity fixed income securities, the prevalence of complex computer and electronic bond trading systems, and the increasing correlation between global and regional economic trends and interest rates.