1994 Bond Massacre
February 1994 – November 1994
Duration: 9 monthsS&P 500 DRAWDOWN
−9%
peak to trough
What Happened
TRIGGER
Unexpected aggressive Fed rate hikes, bond market panic, Orange County bankruptcy
The Federal Reserve surprised markets by raising rates six times in 1994, from 3% to 6%. The sudden tightening caused a global bond market rout — the worst in decades — destroying an estimated $1.5 trillion in bond market value. While equity damage was limited (S&P 500 fell only 9%), the bond carnage caused the bankruptcy of Orange County, California, and triggered the Mexican Peso Crisis.
Key Facts
- 01Fed raised rates 6 times, doubling the federal funds rate from 3% to 6%
- 02US 30-year Treasury yield surged from 6.2% to 8.2%
- 03Orange County, California declared bankruptcy after $1.7 billion loss
- 04Global bond market lost an estimated $1.5 trillion in value
- 05Triggered the Mexican Peso Crisis (Tequila Crisis) in December 1994
Worst Performers
top 5 biggest losersBest Performers
top 5 most resilientSector Breakdown
HARDEST HIT SECTORS
MOST RESILIENT SECTORS
Recovery Timeline
4 months for S&P 500 to recover (early 1995)
Time from trough to prior all-time high
PORTFOLIO STRESS TEST
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Historical data is educational only. Not financial advice. Past crisis returns do not predict future performance.