8
Bond Market Crash: What It Is and How to Prepare
Bond Market Crash: What It Is and How to Prepare
A sudden and dramatic decline in bond prices may signal a market crash. Learn more about how high interest rates and economic conditions can decrease bond prices.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Best Financial Advisors Find a Financial Advisor Near You | NerdWallet How to Choose a Financial Advisor in 5 Steps 5 Best Wealth Management ServicesWhat is a bond market crash?
A rapid decline in bond prices signals a bond market crash. The bond market comprises corporate and government debt. Bonds play a significant role in the global economy, and if the bond market declines or crashes, your investment account will likely feel it in some way. This can be especially concerning for investors with portfolios heavily weighted toward bonds, such as those in or near retirement.Is the bond market crashing now?
There is no official threshold for a bond market crash, but the bond market took a steep dive in April 2025 as a result of President Donald Trump's tariffs and the global trade war. This was alongside deep stock market declines. Bond prices dropped sharply as Treasury yields jumped — a reaction that has surprised many economists, as bonds typically represent a safe haven for investors during periods of stock market volatility and recession fears. » Looking to avoid volatility? See the best low-risk investments right now » Looking to avoid volatility? Brokerage firms Learn more Learn moreon Charles Schwab's website
Learn more Learn moreon E*TRADE's website
Learn more Learn moreon Vanguard's website
Learn more Learn moreon Fidelity's website
How to prepare for a bond crash
Diversify
Economic shocks are temporary and often unavoidable. Regardless, spreading your investment dollars across different types of investments by diversifying can help reduce the risks associated with any one asset. diversifying Owning different types of bonds and bonds of varying durations can also help reduce exposure to interest rate risk. Buying many bonds bundled together in bond funds is one strategy for quickly diversifying your bond portfolio. Short-term bond funds are less likely to be affected by interest rate risk because interest rates typically increase or decrease slowly over months and years. In bonds with shorter durations, there’s simply less time for interest rate risk to take hold. » MORE: How bond ladders work » MORE:Long-term investors who are more than five years away from their goal
It’s hard (or impossible) to predict a crash. But you can prepare your mindset for how to respond when it happens. Try to avoid selling when the market is down if you can. Remember, when you sell, you lock in your losses. A bond market crash won’t last forever, and you don’t want to lose out when the market rebounds. » Try exploring long-term investing scenarios with our retirement calculator. » Try exploring long-term investing scenarios with our retirement calculator.Short-term investors who are nearing their money goal
Bond crashes can significantly affect investors close to their money goal, such as someone approaching retirement. One financial strategy is to hold a portion of the money you need short-term in investments less likely to be affected by interest rate risk, such as money market funds, high-interest savings accounts, CDs and short-term bond funds.Treasury bond market crash of 2022
Interest rates and the price of bonds have an inverse relationship. As interest rates go up, the market value (price) of bonds declines. When the Federal Reserve raises the federal funds rate, it can affect bond prices. This happens because new bonds offer higher interest rates than previously issued bonds, which makes the older bonds worth less money in the secondary market. For bondholders, this is known as interest rate risk. Rising interest rates in 2022 triggered the Treasury bond market crash that played a significant role in the collapse and sell-off of Silicon Valley Bank in early 2023 .Bond risks
Bonds are generally considered a less risky complement to the volatility of stocks in an investment portfolio. U.S. Treasurys — specifically Treasury bills and Treasury notes — are the benchmark for a nearly risk-free investment if held to maturity. As a result, people often look to the 10-year Treasury yield as a barometer of the economy. But that doesn’t mean that investing in Treasurys or bonds doesn’t come with risks (such as interest rate risk), especially if you plan to sell before the bond's maturity. That’s because bonds are still highly affected by interest rates and the broader economy.Earn 3.75% APY by investing in U.S. Treasury Bills*
3.75*Rate when held to maturity. Rate shown is subject to price fluctuations.
Explore more on Article sources NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines. Chicago Booth Review. Did the Fed Contribute to SVB’s Collapse?. Accessed Jan 26, 2026. About the author Durana Alieza Durana is a former investing writer at NerdWallet. She has over a decade of journalism experience covering housing, labor, gender and public policy issues for the Eviction Lab, The Fuller Project for International Reporting, New America and Slate. Her work has appeared in USA Today, The Washington Post, The Atlantic and Harvard Business Review. She is based in St. George, Utah. How Much Does a Financial Advisor Cost? By Arielle O'Shea Do You Need a Financial Advisor? 7 Ways to Tell By Taryn Phaneuf How to Find Cheap or Free Financial Advice By June Sham 3 Steps to Prepare for Your First Financial Advisor Meeting By June Sham