The calm half of your portfolio is now losing more than stocks
American bond funds have received a record $542 billion this year from people seeking calm. On Tuesday, the largest of them fell 1.3%, nearly twice as much as the Nasdaq on a day when Nvidia dropped. Yet the statement shows a rising yield.
Key points
The largest bond fund fell nearly twice as much as the Nasdaq on Tuesday, a day when Nvidia dropped.
Record $542 billion has flowed into American bond funds this year, mostly for safety.
The account statement for such a fund shows a rising yield exactly when the holder is losing money.
Fed Governor Waller said before the inflation release what he would consider if core came in at 0.3%.
The fate of the bond part of a portfolio is decided by a single number on the first page of the fund's fact sheet.
The worst day in 19 months did not happen on the stock exchange
Tuesday, November 10 looked like an ordinary weaker day on the stock market. The S&P 500 index lost 0.4% and all the headlines belonged to Nvidia $NVDA, whose shares fell 5.5% after the board opened an investigation into CEO Jensen Huang. But the real shock happened elsewhere, in a market most investors do not watch at all: U.S. government bonds. Their yields jumped the most since April 2025, when markets were rattled by the tariff war.
Why should anyone who has never knowingly bought bonds care? Because they probably own them. Bond funds are the standard 'calm half' of pension plans, robo-advisors and balanced portfolios, and this year investors poured record money into them. The reason was simple: after a long period of near-zero rates, U.S. government bonds suddenly offered about 5% a year, which next to overheated AI stocks looked like a safe haven.
But it was in this haven that money was lost faster than on the stock exchange on Tuesday. The largest long-dated U.S. bond fund fell nearly twice as much as the Nasdaq index in one day. And unlike Nvidia, nobody wrote about it.
The worst part is that the loss is essentially invisible. The account statement shows a rising yield for the fund, and most people read that as good news. Whether the loss deepens by December or starts to fade is determined by a single number that every fund puts on the first page of its fact sheet and almost nobody reads.