Which 1994 bond-market crash was triggered partly by rapid U.S. interest-rate increases?

The 1994 bond-market crash triggered partly by rapid U.S. interest-rate increases was the Great Bond Massacre.

The Federal Reserve began raising the federal funds rate in February 1994 after keeping short-term rates low during the early-1990s recovery. Investors had not fully anticipated the speed and scale of the tightening. As yields rose, existing bonds lost value, producing heavy losses across government, corporate, municipal, and mortgage markets.

The damage was especially serious because many institutions treated bonds as relatively safe assets and used leveraged or complex positions. Orange County, California, declared bankruptcy in December 1994 after investment losses in its leveraged pool. Several banks and investment firms also reported substantial losses.

The episode was not a conventional equity-market crash, but it was one of the most severe bond-market selloffs of the modern era. The name “Great Bond Massacre” is therefore more precise than calling it a stock crash. It also encouraged better risk management and greater attention to interest-rate exposure.