The Zhitong Finance App learned that the US Treasury bond market had an unfavorable start in early July. As yields rose, long-term US bonds experienced a difficult period. Investment research firm Bespoke Investment Group said in an email on Monday: “The bond market has been declining.”

The data shows that in the past year, the total return on the BofA 10-year US Treasury Index fell by 5.1%. “The annualized return over the past two years was even worse, falling 6.1%,” Bespoke said.

The US bond market has been struggling after the Federal Reserve dealt with surging inflation for more than two years. Although the inflation rate has abated significantly since its peak in June 2022, its stubbornness has made many investors uneasy in the volatile bond market.

Bespoke found that since 1978, in the past 41 months, the BofA 10-year US Treasury Total Return Index had a positive return for only one month. Speaking about long-term treasury bonds, the bank said, “Compared to history, this long-term continuation of continued weakness is unprecedented. The only period of similar continuing weakness was from October 1979 to October 1981.”

As of Monday afternoon, 10-year US Treasury yields were up about 11 basis points to about 4.48%, according to FactSet data. There is an inverse relationship between bond yield and price.

SEI Chief Investment Officer Jim Smigiel pointed out in an interview on Monday that he expects the 10-year US Treasury yield to rise to about 5% by the end of 2024 because inflation is likely to remain “stubborn.” Despite this, he said that the Federal Reserve is expected to start cutting interest rates this year because manufacturing and some other economic sectors are under pressure after the central bank raised interest rates in response to high US inflation.

Smigiel notes that inflation is also putting particular pressure on low-income consumers. But more broadly, “after the Federal Reserve raised interest rates, the economy showed remarkable resilience.” The US unemployment rate has been at an all-time low, at 4% in May.

On Friday, the US Bureau of Labor Statistics will release the June employment growth report.

While many traders expect the Federal Reserve may cut the benchmark interest rate in September, Smigiel believes this may be “a little too early.” After experiencing fluctuations in the fixed income market in the first half of 2024, he expects the US bond market to face more “trouble” for the rest of the year.

According to FactSet data, the iShares US Full Bond Market (AGG.US) began to decline on Monday in early July, with a total return of -0.7% in the first half of 2024. On Monday, the ETF fell 0.54%. Meanwhile, the Vanguard long-term treasury bond ETF (VGLT.US) fell 1.68%, with a total return of -4.7% in the first half of 2024.