As the federal reserve raised its interest rate by over four percentage points in 2022 to combat rising inflation that US Treasury Department The market posted a record annual loss during the year.

What happened: The US bond market index fell 12.5% ​​for the year, the strongest reading in its history, Bloomberg reported. The worst months for the index were September (-3.45%), March (-3.11%) and April (-3.10%). report said.

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Yields peaked in the October-November period, after which they started falling as inflation began to moderate and fall Federal Reserve officials slowed the pace the tightening of politics.

Reversal: The yield curve inverted, with 5-year Treasury yields surpassing 30-year rates for the first time in March, while the spread between 2- and 10-year yields also reversed. The report said that this Inversions have reached historical extremesmeaning that investors assume that high short-term yields will do economic damage.

The inversion of the 2-10 year curve reached as high as 85.2 basis points on Dec. 7 before ending 2022 at just under 56 basis points. The five-year premium over the 30-year rate hit as much as 46.8 basis points at one point, the report said.

That Vanguard Total Bond Market Index Fund ETF BND and the iShares Core US Aggregate Bond ETF AGG Lost over 14% in the last year.

Outlook 2023: For 2023, many US interest rate strategists believe government bonds will continue their recent rally as long as job conditions weaken and inflation continues to fall, yields fall and the curve steepens in the second half of the year, the report said.

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