Bond funds, ETFs with the worst returns in 2022

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Bond funds are booming. In fact, it’s probably one of the worst years in most investors’ memory for the bond markets, said Morningstar analyst Ben Johnson.

In effect, The Wall Street Journal reported that it was the worst bond market since 1842. Unsurprisingly, long-term bond funds and ETFs were high on the list of worst performers, as they are the most sensitive to rising interest rates. ‘interest. Managers mandated to stay invested in these stocks must feel some frustration with these historic headwinds.

Johnson, director of global exchange-traded fund research for Morningstar, said the formula for why bond funds are having a tough time is simple. Since interest rates and bond prices are on opposite sides of the swing, bond rates will fall if interest rates rise. But bond prices have been particularly problematic because rates started at such low levels to begin with and have risen significantly from where they started. The Federal Reserve interest rate is 0.75% to 1.00%. Rates were raised by 0.5% on May 4, with more expected in the coming months.

“So when people come up with notions that bonds are there to diversify risk – if stocks go up, bonds go down and vice versa – that’s not how it all works, and we’ve been told that. reminded very clearly of this year,” Johnson said.

The bad news will continue for some time, Johnson said, noting it will be a painful process. But there’s also good news ahead, because when bond yields mature today, that money will likely be reinvested in bonds with relatively higher fixed coupon payments, he said. But for now, it’s going to be particularly painful, because we started with such a low level of interest rates.

Here’s Morningstar’s list of the 15 worst-performing bond funds and ETFs so far this year, as of April 30.


15. PIMCO Long-Term Credit Bond Institute
Cumulative return: -19.74
Investment type: Open-end fund
Purpose of the Prospectus: Growth and Income
Management Company: Pacific Investment Management Company, LLC

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