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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.

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Lead Writer

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.

Chris Davis

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12 years of experience

Expertise

• Brokerage accounts
• stock market
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Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet.

Published in

Managing Editor

Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet.

What 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.

» Search for a financial advisor who can help you invest strategically

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.

Brokerage firms

on Charles Schwab's website

on E*TRADE's website

on Vanguard's website

on 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.

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

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.

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 3.71% APY by investing in U.S. Treasury Bills*

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