Take a look at this chart. It shows the monthly flows to bond mutual funds over the last two years. See if you can spot the outlier:

Source: ICI.

Suddenly, nobody wants bonds.

That's understandable. Interest rates are rising, and for the first time in years, bonds are losing money. The PIMCO Total Return Fund is down 5.6% since April. The Vanguard Long Term Corporate Bond ETF (NASDAQ: VCLT) is off nearly 10% in the last three months. The popular iShares Barclays 20 Year Treasury Bond ETF has lost more than 11% in the last 90 days.

But what's interesting -- maybe scary -- to think about is that the rise in interest rates over the last month isn't that large, historically. Interest rates on 10-year Treasury bonds have increased by about 60 basis points in the last month, according to data from the Federal Reserve. In percentage terms, that's a lot. But interest rates are so low right now that percentage gains can be deceptive -- a doubling of interest rates from last summer's lows would mean a gain of only a little more than one percentage point.

In absolute terms, the rise in interest rates over the last month isn't that impressive: 

Source: Federal Reserve, author's calculations.

If bond investors have panicked at what has been a pretty mild rise in interest rates, what will they do when rates really start to rise?

It won't be pretty. My guess is there will be a few more outliers on that first chart. 

More from the Motley Fool
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Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.