TREASURY YIELDS JUMP, BOND MARKET POSTS WORST QUARTER IN 40 YEARS

Despite the late March rally in yields, bonds notched their worst quarterly performance since the 1980s, due to inflation and growing certainty that the Fed will boost interest rates by a half-point at its meeting in May. 
The Bloomberg U.S. Aggregate Bond Index, which holds U.S. treasury bonds, high-grade corporate bonds, and mortgage-backed securities, lost 5.9 percent over this year’s first quarter, its worst showing since 1980.
Today, the 30-year mortgage rate pushed above 5 percent, the highest level since one day in 2018.
During this year’s first quarter, yields on two-year treasury securities rose the most in any quarter since 1984 and the five-year yield grew the most since 1987.
Yields rise when bond owners sell. Yields climbing sharply is a signal that bonds are not popular investments.
Bonds have long been seen as a safe haven for value during turbulent times. 
However, the U.S. Federal Reserve’s schedule of rising interest rates, the Ukraine war, and untamed inflation have all robbed bonds of their allure.
Investors are reluctant to lock in current interest rates when rates could be higher in the future, costing today’s investors profits.
In the long term, higher interest rates could cool inflation and even throw the economy into recession, a scenario in which bonds would fare better than most other investments.
TREND FORECAST: Long-term expectations of higher interest rates are likely to keep hammering bonds.
And while the Fed has indicated that it expects to set rates to at least 2 percent by the end of this year—and the interest-rate derivatives market shows investors expect rates to climb to at least 3 percent in 2023—should inflation keep its pace and geopolitical tensions ensue, interest rates, as we noted above, will hit the 3 percent range. 
And while The Street expects interest rates to fall quickly once inflation has been halted—so that consumer spending can bounce back—we see a much more complicated scenario with various geopolitical events keeping inflation levels high… along with interest rates.