Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
What next?
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Motley Fool Returns
Market-beating stocks from our flagship service.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 2025-08-28 21:35:19.375724.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
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 (VCLT +0.00%) 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:
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.