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Bond crash 2022: the year "safe" money fell 13%

Bonds are supposed to be the calm part of a portfolio. In 2022, the main index of US bonds fell about 13%, its worst year since the index began in 1976. Stocks fell at the same time.

Story · 7-minute read · Updated 2026-10-21

Why bonds are called "safe"

A bond is a loan. You lend money to a government or company. They pay you interest, then give your money back at the end.

US government bonds are seen as some of the safest in the world. The chance of the US missing a payment is very small.

So for decades, many people held bonds to balance out stocks. When stocks fell, bonds often held up or rose.

2022 broke that pattern.

The one rule that explains it

Here's the key idea, in plain words.

When interest rates go up, the price of existing bonds goes down.

Why? Say you own a bond paying 2% a year. Then new bonds start paying 4%. Nobody will pay full price for your 2% bond when they can get 4% elsewhere. So your bond's price has to fall until its yield matches the market.

The longer a bond has left before it pays back, the bigger the price drop for the same rise in rates.

See what a bond yield is for more.

What happened

Inflation arrives

In 2021, prices for goods, fuel and rent started rising fast. At first, the Federal Reserve called it temporary.

By 2022, it clearly wasn't. In June 2022, US inflation hit 9.1% a year, the highest in about 40 years.

The Fed moves fast

The Fed's main tool against inflation is raising interest rates. In 2022, it did that faster than it had in decades.

• March 2022: the first hike, from near zero.
• June, July, September and November: four hikes of 0.75 points each.
• December: a 0.50-point hike.

In total, 7 hikes and 4.25 points, taking the Fed's rate from 0–0.25% to 4.25–4.50%. That was the biggest rise in a single year since 1980. Our FOMC meeting guide explains how these decisions are made.

Yields jump

The yield on the 10-year US Treasury started 2022 around 1.5%. By late October it was about 4.2%. You can follow it on our 10-year Treasury yield page.

Rising yields meant falling bond prices, across the board.

The moment everyone remembers

In the UK, it got dramatic.

On 23 September 2022, the new UK government announced big tax cuts without saying how it would pay for them. UK government bonds, called gilts, sold off hard. Long-term yields jumped by about 0.8 points in two trading days.

Many UK pension funds used a strategy that relied on borrowed money backed by gilts. As gilt prices fell, they had to post more cash, so they sold more gilts, which pushed prices down further.

The Bank of England later said some funds were hours from collapse. On 28 September 2022, it stepped in and began buying long-term gilts to stop the spiral. The tax plan was mostly reversed, and the prime minister, Liz Truss, resigned on 20 October.

How the year ended

• The main US bond index (the Bloomberg US Aggregate) fell about 13%, its worst year on record.
• The S&P 500 fell about 19%.
• Stocks and bonds falling together left very few places to hide.

The damage didn't stop at year-end. In March 2023, Silicon Valley Bank failed, partly because of losses on bonds it bought when rates were low.

What it teaches

1. "Safe from default" isn't "safe from price swings"

US bonds paid every cent they owed in 2022. Their prices still fell a lot. Know both risks before you hold anything. Read how interest rates affect stocks, because the same force hit both.

2. Rates move almost everything

When the cost of money changes, it changes the value of bonds, stocks, currencies and gold. That's why many traders check the Fed's calendar first. Our CPI and FOMC days guide shows what to check before those days.

3. Things that usually move apart can move together

For years, bonds often rose when stocks fell. In 2022 they fell together. Patterns from the past aren't promises about the future. See correlation.

4. Borrowed money makes a slow move fast

The UK pension spiral happened because of leverage on top of falling prices. A normal move became a crisis because people had to sell. See leverage and margin explained.

What it doesn't mean

• It doesn't mean bonds are a bad idea. After prices fell, new bonds paid much higher yields than before.
• It doesn't mean it happens every year. 2022 was the worst year in the index's history. That's why it's a story.
• It doesn't mean you can predict rates. Most forecasters in 2021 expected far smaller rate rises.
• It doesn't mean holding to maturity loses money. A high-quality bond held to the end still pays back its face value. The price swing matters if you need to sell early.

Timeline

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