Half of All Bond ETFs Are Underwater on a One-Year Basis
As seen on the 24/7 Wall St. homepage on October 5, 2026.
Half the bond ETF universe is underwater over the past year on a nominal basis, and Balchunas notes real returns are worse. The supposed safe sleeve of the portfolio is quietly costing money.
About 50% of bond ETFs are now posting negative 1yr returns. Nowhere near 2022 Fed hike days but the move up is pretty dramatic. And this is nominal return, obv real returns much worse. All that said, despite the abrupt shift in bonds, and uptick in volume, the ETFs' arb bands https://t.co/zpEcFdcMy0
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Bloomberg Intelligence's Eric Balchunas flagged on October 5 that roughly 50% of bond ETFs are now posting negative one-year returns on a nominal basis, a threshold that quietly marks how broad the damage across fixed income has become. He was quick to note this is still nowhere near the severity of the 2022 Federal Reserve rate-hike cycle, but he described the move up in yields as pretty dramatic given how abruptly it has unfolded.
The nominal framing matters because it is already the more flattering lens. Real returns, which strip out inflation, are measurably worse, meaning the actual purchasing-power loss for investors holding bond funds is larger than the headline numbers suggest. For anyone who relies on the fixed-income sleeve of a portfolio for capital preservation, that distinction is not academic.
Balchunas also noted an uptick in volume across bond ETFs alongside this shift, which speaks to how actively investors are repositioning. Despite that turbulence, he indicated that ETF arbitrage bands have held, a sign that the fund structure itself is functioning even as the underlying bond market moves sharply.
The practical read for investors is that the part of the portfolio traditionally treated as the safe sleeve is quietly generating losses, and on a real-return basis the situation is more acute than most screens show. Watching how bond ETF flows and yields develop from here will matter for anyone calibrating risk between equities and fixed income.