The “safe” part of the portfolio has been losing money for 74 months. U.S. bonds are experiencing the longest slump in history

Bonds are supposed to cushion a portfolio against shocks. But U.S. Treasuries have been losing value for more than six years, the 10-year yield has jumped above 5%, and long-term funds are down by a third over five years. What had to happen for “safety” to stop working?

When people hear “Treasury bond,” most picture a boring but dependable part of a portfolio. Something that earns a steady return and holds up in a crisis. But the U.S. bond market hasn’t played that role for six years. It has been unable to return to its previous value since peaking in August 2020, and this fall showed why it has taken so long.

Six years without returning to the peak

Charlie Bilello, chief market strategist at Creative Planning, tracks the decline in the broad U.S. Bloomberg Aggregate Bond Index month by month. In July, he wrote on X that the market had been down for 71 months, and in early October the count passed 74 months. Previous records were considerably shorter, and the index’s maximum peak-to-trough decline reached 17.2%.

“The U.S. bond market is now in a slump that has lasted 71 months, by far the longest in history.”

Charlie Bilello, chief market strategist at Creative Planning, on X (July 2026)

Bank of America takes an even longer view. According to data from its Global Research that circulated among investors this week, the current downturn ranks as the second-longest since Alexander Hamilton, the first Treasury secretary, established the U.S. bond market. In other words, in more than two centuries of U.S. government debt, bondholders have had to wait longer for a recovery only once.

This is no academic curiosity for Czech investors. U.S. Treasuries are the foundation of most bond ETFs and balanced funds sold in Europe, too. Anyone with a classic portfolio allocation of 60% stocks and 40% bonds has carried this slump with them the whole time.

Why a bond that pays fixed interest is losing money

It seems paradoxical. A bond promises a fixed coupon and returns the principal at maturity. So where does the loss come from? The answer is that bonds trade on the market all the time, and their prices adjust to reflect what new issues offer.

When the U.S. Treasury sells a new 10-year bond today with a yield above 5%, no one will buy an older bond with a 1.5% coupon at full price. Its price has to fall enough for its yield to match. And the longer the maturity, the longer the holder is “stuck” with a low coupon, and the bigger a discount the market demands.

This year’s figures make the point clearly. The 10-year U.S. Treasury yield stood at 3.97% on February 27. In early October, it climbed as high as 5.36%, its highest level since 2002, and closed at 5.10% on October 15. In a letter to the Treasury secretary, senators noted that the third quarter brought the largest quarterly increase in yields since 1994.

The difference between short- and long-term bonds is stark. The table shows the total returns of four iShares funds by the maturity of the bonds they hold (as of October 15, 2026):

Fond $TLT, nejsledovanější dlouhé dluhopisové ETF na světě, spravuje přes 48 miliard dolarů a jeho efektivní durace činí 14,8 roku. Zjednodušeně: každý procentní bod, o který se pohne výnos dlouhých dluhopisů, znamená zhruba 15 % v ceně fondu. Oběma směry. Krátký $SHY má durace necelé dva roky, a proto za pět let vydělal, zatímco $TLT ztratil třetinu.

The Fed raised rates, but that didn’t help long-term bonds

It might seem that when a central bank tightens policy, inflation cools and bonds get some relief. But this year, the opposite happened. On September 16, the U.S. Fed raised rates by a quarter point to 3.75%–4.00%, for the first time since 2023 and unanimously. Long-term bond yields kept rising anyway.

The reason came in the September inflation report: consumer prices rose 3.7% year over year, the most in several months, and gasoline alone became 9.1% more expensive in a single month. The market simply didn’t believe that one rate hike would be enough. In their projections, most members of the monetary policy committee expect another increase before the end of the year, and the next meeting is scheduled for October 27 and 28.

At a press conference after the meeting, Fed Chair Kevin Warsh explained why he thinks long-term yields have risen this year. Inflation isn’t the only factor.

“I’ll give you three reasons. The first is the strength of the economy. Part of the reason long-term yields have risen over the course of 2026 is that the economy has strengthened. The second is competition for capital. The increase in capital spending is real, and the so-called hyperscalers are out in the market looking for financing. The third is geopolitics.”

Kevin Warsh, Fed Chair, press conference after the FOMC meeting on September 16, 2026

The second point is worth noting. Tech giants are financing the construction of AI data centers with hundreds of billions of dollars in debt, and the government is competing directly with them for investors’ money. When Microsoft, Amazon, and the U.S. Treasury are all asking for capital at once, the cost of money rises for everyone.

The Treasury tried to “outmuscle” the market

In September, Treasury Secretary Scott Bessent tried to calm the long end of the market by force. He expanded buybacks of long-term bonds and told investors that he was now “the casino” and they could bet against him if they wanted. The market took the bet. The 10-year yield broke through 5% within a few weeks, and the 30-year bond reached 5.7%, also its highest level since 2002.

In early October, Bessent admitted in an interview that he couldn’t control the bond market and reframed his bet.

“The casino doesn’t win every hand; the casino plays the odds. Everyone in the market knows you don’t win every game—you win over time.”

Scott Bessent, U.S. Treasury secretary, in an interview with Axios (October 2026)

For the government, this comes at a very concrete cost. The federal deficit for fiscal year 2026 reached $1.99 trillion, and the government’s net interest costs exceeded $1 trillion a year for the first time. Every bond Washington sells or refinances now locks in higher interest costs for the next 10 or 30 years. Yet as recently as February, the Congressional Budget Office expected the 10-year yield to stay around 4.1% to 4.4%.

This week on CNBC, David Zervos, an adviser to Secretary Bessent, argued that real yields are exceptionally high by historical standards and have room to fall once the energy shock fades. The market is still waiting.

What would it take to reverse the slump?

Dluhopisové medvědí trhy v minulosti končily vždy stejně: inflace se otočila dolů a výnosy dosáhly vrcholu. Letošní říjen nabídl první náznak. Po zveřejnění inflace a globálním výprodeji akcií se investoři na pár dní vrátili k dluhopisům jako k bezpečnému přístavu, výnos desetiletého papíru klesl z 5,36 % na 5,10 % a $TLT za týden posílil o 2,7 %. Po pěti letech ztrát je to ale jen škrábnutí.

The key level is the October peak around 5.3%. If the 10-year yield stays below it and inflation starts to fall, the autumn bounce could turn into a genuine reversal. If it breaks above, the longest slump in history will drag on, and long-term funds will take the biggest hit again.

Nahoře zmíněná matematika přitom funguje i opačně. Dluhopisy v $TLT dnes nesou průměrný výnos do splatnosti 5,58 %, což je nejvíc za dvě desetiletí, a investor je poprvé po dlouhé době slušně placený za to, že čeká. Jen musí počítat s tím, že durace 14,8 roku z fondu dělá spíš páku na sazby než polštář. Kdo chtěl v portfoliu „bezpečnou" složku, měl ji posledních šest let ve skutečnosti v krátkých splatnostech. A to se v dohledné době nejspíš nezmění.