Just over a month ago, we pointed out that the tide was turning on negative yields:
LINK: What Happened to Negative Yields?
The turning tide has become a tidal wave:
LINK: Bonds Suffer Worst Ever Meltdown
Here are the two month returns for the Vanguard Total Bond Market ETF (the most popular bond ETF: BND US), the US 10 year note, and the German 10 year bund:
Now, these are not cataclysmic draw downs, but the effect on investor psychology can not be discounted. Bonds have had a wonderful 30 year run, and bond funds have seen massive inflows. But nothing lasts forever, and market movements can become self fulfilling prophecies, especially when it comes to crowded trades. Losing money on bonds is not something that this generation of investors are used to, and outflows from bond funds will lead to forced selling, which will lead to further pressure on bond prices, which will lead to further bond fund redemptions, which will lead to… I think you get the point.