The U.S. economy has grown faster in dollar terms over the past six years than at almost any point in modern memory. Over that same stretch, the bond that is supposed to be the world's safest long-term asset has lost more than half its value.

U.S. nominal gross domestic product, which measures the size of the economy before adjusting for inflation, is up 63% in six years. The price of the 30-year Treasury bond is down 45% over the same period, as Bank of America's Michael Hartnett laid out in his latest 'Flow Show' note.

Why Strong Growth Hurts Long Bonds

A bond pays a fixed coupon. When growth and inflation run hot, investors demand a higher yield to hold that fixed payment. Bond prices move opposite to yields, so when yields rise, prices fall. The longer the maturity, the bigger the drop, because those payments are locked in for decades.

According to Hartnett, that explains why investors are positioned for a final surge in both stocks and yields. They stay long equities and short bonds until rising yields start to damage growth.

The Pressure Has Built Since Jackson Hole

Since Federal Reserve Chair Kevin Warsh turned hawkish at Jackson Hole, the 10-year Treasury yield has risen 60 basis points, or 0.60 percentage points. The dollar is up 2%, while stocks are down 1%.

Central banks worldwide have raised rates 60 times this year, compared with 20 times in 2025. Bond volatility is rising too. The MOVE index, which tracks expected swings in Treasury yields, jumped 33% in two days.

Hartnett said a MOVE reading above 125, together with the iShares Global Financials ETF (NYSE: IXG) falling below $125, would point to a risk-off deleveraging event.

History Shows Where Yield Surges Have Ended

The 10-year yield is up 127 basis points since February. In past cycles, a 200-basis-point rise in Treasury yields ended the Nifty Fifty boom in 1973. A 230-point rise in Japanese government bond yields ended Japan's bubble in 1989. A 260-point rise in Treasury yields ended the tech bubble in 2000.

“Policymakers never run out of ammunition. But they can run out of credibility,” Hartnett said.

His base case is that policymakers step in to push oil and yields lower. For that reason, he suggests starting to buy bonds. If yields fall 100 basis points over the next 12 months, BofA estimates returns of 10% on the five-year Treasury, 14% on the 10-year and 22% on the 30-year.