Under pressure central banks who are determined to stop him inflation even at the cost of a recession bonds around the world for the first time in many years came together. The Bloomberg Global Index of Combined Investment-Grade Government and Corporate Bond Yields fell more than 20 percent from last year’s highs. Thus, it records the biggest decline since 1990, when it was passed.

Inflation and a sharp rise in interest rates put an end to a four-decade bull market in bonds. This is creating a particularly challenging environment for investors this year as bonds and stocks tumble at the same time. “I suspect that the bond bull market that began in the mid-1980s is coming to an end,” said Steven Miller, investment adviser at GSFM. Yields will not return to historical lows seen both before and during the pandemic.” He noted that high inflation prevents central banks from implementing economic stimulus policies and quantitative easing programs that have led to bond yields falling below 1%.

European bonds have been the hardest hit this year as Russia’s invasion of Ukraine sent gas prices skyrocketing. The transition in much of the world from unprecedented easing to the sharpest rate hike since the 1980s has drained liquidity, JP Morgan Chase & Co. notes. “The bond and foreign exchange markets saw a significant deterioration in liquidity this year compared to other asset classes, with little sign of a reversal,” strategists including Nikolaos Panigirtzoglou wrote in a note. Downward momentum in bonds is approaching extreme levels, they said.

Analysts believe that yields are unlikely to return to historical lows seen both before and during the pandemic.

In many ways, the economic and political realities that investors now face mirror the bond market slump of the 1960s that began in the second half of this decade, as a period of low inflation and unemployment came to an abrupt end. As inflation accelerated in the 1970s, bond yields rose. They later reached nearly 16% in 1981, after then-Fed Chairman Paul Volcker raised interest rates to 20% to tame inflationary pressures.

Both Jerome Powell, head of the US Federal Reserve, and other central bankers from Europe to South Korea and New Zealand said at their recent meeting that interest rates will continue to rise at a steady pace. However, investors are showing interest in government bonds as yields rise, while expectations prevail that policymakers will be forced to change course if the economic downturn helps reduce inflation.

“The current trend is more of a necessary correction than a period of unsustainably extremely low yields,” said Stephen Ok, head of lending and fixed income at PineBridge Investments LP. “We expect yields to remain low by long-term historical standards, with 2022 likely to be the current cycle’s peak 10-year bond yield.”