Finance
300 years of wars show they are ‘always disaster times’ for holders of government debt because of inflation and financial repression | Fortune
Government bonds, especially Treasuries, have long been seen as a safe haven during recessions, geopolitical calamities, and other market-moving disasters that create uncertainty.
But after looking at 300 years of U.S. and U.K. history, the Center for Economic Policy Research found that wars and pandemic-scale emergencies have pummeled holders of debt.
“The historical evidence reveals a striking pattern: government bonds have repeatedly generated substantial real losses during these extreme episodes,” authors Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh, and Mindy Xiaolan wrote. “They have even underperformed equities and real estates which are traditionally regarded as risky assets.”
That’s because wars typically triggered large increases in government spending, averaging about 7% of GDP annually during the first four years, and tax hikes alone were rarely sufficient for financing needs, they added.
The finding comes as the U.S. is waging war on Iran while the national debt has exploded to $39 trillion. The Pentagon is seeking more than $200 billion in a budget request for the conflict, sources told the Washington Post.
Across their dataset, the CEPR authors calculated that bondholders suffered average real losses of roughly 14% during the first four years of conflicts. The losses were so steep that they reduced the real value of government debt outstanding.
To add insult to injury, cumulative bond returns were more than 20% below the cumulative returns on stocks and real estate, the opposite of how those assets perform during financial crises or recessions.
“Whenever there is a major war, we observe a sharp decline in the bond performance — wars are always disaster times for bondholders,” they warned. “Similarly, the bondholders also suffered large losses during the ‘war on Covid-19.’”
Center for Economic Policy Research
A key factor in bond losses is inflation, according to CEPR, which said the cumulative rate averaged about 20% in the first four years of wars.
In fact, during the current U.S.-Israel war on Iran, Treasuries and government debt from other countries have sold off sharply as surging oil prices have raised expectations for elevated inflation while budget deficits are also seen worsening. Since the war began three weeks ago, the U.S. 10-year yield has soared more than 40 basis points.
But profligate spending wasn’t the only way inflation weighed on bonds. The think tank said it was often the result of policy choices to reduce debt burdens without explicitly defaulting, such as by suspending gold standard commitments.
Another reason bonds perform so poorly during wars is so-called financial repression, or government policies that curb borrowing costs by influencing financial markets. That prevents bond yields from keeping pace with inflation.
For example, the Federal Reserve implemented yield-curve control, capped Treasury rates, and launched massive bond buying during World War II.
CEPR’s findings have particular relevance for U.S. debt as Treasuries continue to form the foundation of the global financial system with the dollar serving as the world’s reserve currency.
That status has allowed the U.S. to borrow more cheaply than investors would otherwise allow. Meanwhile, the interest on U.S. debt is now the fastest-growing budget item and is already at $1 trillion a year. CEPR said its report presents governments with an important tradeoff.
“Protecting taxpayers from large spending shocks may require shifting part of the burden onto bondholders through inflation or financial repression,” it said. “Economic theory suggests that such policies may be optimal when taxation is highly distortionary. However, they also reduce the safety of government debt and may raise borrowing costs over time if investors anticipate these risks.”
The FTSE 100 (^FTSE) was hovering around the flatline on Friday, while European stocks headed lower, as traders shrugged off Donald Trump’s latest pause on striking Iran’s energy infrastructure.
On Thursday night, the US president extended the deadline for Iran to open the strait of Hormuz by 10 days, meaning the new date would be 6 April. He claimed that talks were “going very well”. However, Iran denied it was “begging to make a deal”, despite Trump’s earlier claims.
It comes after Wall Street posted its biggest daily loss since the Iran war began on Thursday.
The Wall Street Journal also reported on Thursday that the US was considering sending as many as 10,000 additional troops to the Middle East.
Tony Sycamore, market analyst at IG, said Trump has extended the uncertainty gripping markets.
“While the rhetoric around de-escalation and dialogue is certainly preferable to outright conflict, the market appears to be growing increasingly numb to President Trump’s verbal reassurances. By extending the deadline, it effectively kicks the can down the road, pushing back any concrete resolution regarding the reopening of the Strait of Hormuz. This, in turn, simply extends the uncertainty weighing on markets and the broader global economy.”
Elsewhere, UK retail sales dipped by 0.4% in February, following a rise of 2.0% in January, the Office for National Statistics revealed. In the December to February quarter, sales volumes were up 0.7% compared with the previous three months.
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London’s benchmark index (^FTSE) was hovering around the flatline in early trade
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Germany’s DAX (^GDAXI) dipped 0.5% and the CAC (^FCHI) in Paris headed 0.2% into the red
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The pan-European STOXX 600 (^STOXX) was down 0.3%
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Wall Street is set for a muted start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all lacklustre.
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The pound was 0.1% down against the US dollar (GBPUSD=X) at 1.3311
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FARGO, N.D. – North Dakota State University’s College of Business has launched the Center for Banking and Finance, a new academic and industry‑engaged hub designed to prepare students for careers in banking and finance while supporting the evolving workforce needs of the region’s financial industry, a release states.
Announced during a press conference at NDSU’s Louise Auditorium at Barry Hall, the center brings together students, faculty and industry partners to expand experiential learning opportunities, strengthen connections to employers, and address emerging trends shaping the financial services industry. The center is housed within NDSU’s College of Business and builds on growing student interest in finance‑related programs.
“The Center for Banking and Finance reflects NDSU’s responsibility as a student‑focused, land‑grant, research university to respond to workforce and economic needs across our state and region,” said Interim President Rick Berg. “By connecting education, industry, and community, this center helps ensure our graduates are prepared to contribute on day one and throughout their careers.”
The center will support undergraduate and graduate students through hands‑on learning experiences, exposure to financial tools and technologies, and direct engagement with financial institutions, regulators and business leaders. It will also serve professionals already working in banking and finance through workshops, training and research‑informed programming aligned with business needs, according to the release.
“The Center for Banking and Finance is about momentum — students who are eager to learn, faculty who are pushing applied scholarship forward, and industry partners who want to shape the future workforce,” said Kathryn Birkeland, Ronald and Kaye Olson dean of the NDSU College of Business. “When education and industry move together, everyone benefits.”
The launch of the Center for Banking and Finance coincides with a series of regional events focused on finance, fintech and economic outlook, including programming with the Bank of North Dakota, the Federal Reserve Bank of Minneapolis and regional business leaders. Together, these events underscore the Fargo‑Moorhead area’s role as a hub for financial dialogue, talent development and economic collaboration.
The center’s foundational banking partners include Dacotah Bank, Gate City Bank, Bell Bank and Western State Bank, who attended the launch and are helping shape early student experiences and industry-informed programming.
The center is led by Mark Jensen, a career banker and longtime adjunct instructor who joined NDSU full-time in 2026 as director of the Center for Banking and Finance.
“The Center for Banking and Finance is designed as a bridge,” Jensen said. “It brings industry into the learning experience in meaningful ways, and it gives students clearer pathways into a wide range of banking and finance careers.”
For students, the center represents a more direct bridge between academic study and professional opportunity.
“As a finance student, experiences outside the classroom make a real difference,” said Tavian Nelson, a senior at NDSU majoring in finance. “Going into college, I knew I wanted to be involved in the finance program but was unsure of what that would look like once I graduated. The school has truly shaped my desired career outcomes with many hands-on experiences, professional leaders, and connections throughout my time here. This center will truly strengthen these experiences for students.”
Initially, the center will focus on experiential learning opportunities, business partnerships and workforce‑aligned programming, with plans to expand offerings as partnerships and resources grow. The center is supported through external funding and business engagement.
FRANKFURT, March 26 (Reuters) – Euro zone banks have limited direct exposure to the war in the Middle East, but the conflict could still generate systemic stress given interconnected vulnerabilities, European Central Bank Vice President Luis de Guindos said on Thursday.
Financial markets have come under stress in recent weeks from the impact of the U.S. and Israeli war on Iran, but the selloff outside the Middle East has been limited, even as some assets remain overvalued.
“Spillovers to the euro area financial sector have so far remained contained,” de Guindos said in a speech. “Direct bank exposures to the region are limited, and the banking system is well positioned with strong profitability and robust capital and liquidity buffers.”
De Guindos argued that even market infrastructure operators, like central counterparties whose services include energy markets, have managed margin requirements effectively, despite the volatility.
Still, there was a broader risk, given interconnections in the financial system, said de Guindos, whose roles at the ECB include monitoring financial stability.
“Amid already elevated global uncertainty, this conflict could trigger the unravelling of interconnected vulnerabilities and cause systemic stress,” he said.
The conflict threatens to derail market sentiment at a time when asset valuations are high, potentially leading to a sharp repricing of risk for leveraged borrowers and sovereigns while amplifying stress in the non-bank financial sector, he said.
On the ECB’s core mandate of ensuring low inflation, de Guindos repeated the bank’s warning that inflation could rise and growth slow on the conflict but argued more time was needed to understand the full impact.
“We are unwavering in our commitment to ensuring that inflation stabilises at our 2% target in the medium term,” he said.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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