After $17 trillion of liquidity was gushed across the global markets (raising all equity boats), the recent prospect of resurgent inflation has pushed government and corporate bonds around the world to their worst start to a year this century.

Bloomberg reports that the notes have lost over 3.7% so far in 2021, according a Bloomberg Barclays index of investment-grade securities across currencies going back to 1999. That's worse than for similar periods in previous years, even after dip-buying in recent days.

Notably, while equity risk has tumbled, the last few months have seen uncertainty explode higher for rates.

As we recently noted, the surge in yields has put an end to the bull market in long-term U.S. Treasuries that began in the early 1980s. The Bloomberg Barclays U.S. Long Treasury Total Return Index, which tracks bonds maturing in 10 years or longer, has plunged more than 20% since its peak in March 2020, putting the market in bear territory.

This almost unprecedented carnage has strategists predicting large quarter-end rebalancing flows out of equities and into Treasuries. Bank of America strategists estimated that $88.5 billion could shift into U.S. fixed income, including $41 billion into Treasuries.