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.”
When Colangelo College of Business students step into the Charles Schwab Foundation Finance Center this fall, they might feel like they’ve stepped onto a trading floor instead of into a Grand Canyon University classroom.
Renovations, which will begin this summer, come just two months after the announcement that students will be providing research for a stock exchange-traded fund as part of the college’s partnership with Christian financial firm Faith Investment Services.
Plans for the finance center’s remodeling are to incorporate a large ticker board in the center of the room, flanked by two smaller ticker boards that will scroll stock exchange listings.
“The Schwab Center not only has the look and feel of Wall Street, but the latest Bloomberg technology for our students to execute their research assignments,” CCOB Dean John Kaites said.
The frosting on the glass wall along the main corridor of the first floor of the CCOB will be lowered enough to allow tour groups to see inside the room while not distracting students during class.
The space, which will accommodate 34 students, serves as a finance learning center and lab for exams designed to help students get certified for the finance industry.
Business college leaders see the changes as a way to raise the profile of the CCOB and Schwab Center.
“As our students experience real-life research for the New York Stock exchange traded ETF: FTHB, they will have a learning environment that is compatible with their work,” Kaites said.
GCU earned national attention when the FIS Faith Income exchange-traded fund was officially listed on the New York Stock Exchange (FTHB). This fund is believed to be the first ETF – a tradable fund containing a mix of investments organized around a strategy – that provides educational opportunities to students.
CCOB and College of Theology students research high-quality funds as part of that partnership. They are not paid for their work but receive valuable experience.
The CCOB lobby, used frequently for the T.W. Lewis Speaker series and club meetings, also will be remodeled. The northwest corner of the lobby, used often for studying and small gatherings, will be transformed into two offices. Space will remain so students can continue gathering and studying in that area.
The reception desk – where student workers often direct foot traffic at the busiest part of the four-story, 150,000-square-foot building – will be repositioned so it will face the college’s entrance.
The CCOB was revamped last summer to add the T.W. Lewis Center for Student Success, a multifaceted facility that features a broadcast studio with a stick ticker, a podcast room and a broadcast control room.
A Career Services Center also was added on the first floor.
GCU News senior writer Mark Gonzales can be reached at [email protected]
In Q1 2026, EfTEN United Property Fund earned 461 thousand euros in net profit (Q1 2025: 703 thousand euros). The decline in profit is primarily related to the Fund’s investment in EfTEN Real Estate Fund AS shares, whose price on the Tallinn Stock Exchange increased 2.9% in Q1 2026 compared with 4.5% in the same period of 2025. In addition, interest income from the investment in the development company Invego Uus-Järveküla OÜ decreased year-on-year, as the development company repaid the principal and interest of the shareholder loan to the Fund in full in mid-March.
Despite the decline in profit, EfTEN United Property Fund AS received record owner income from its underlying funds at the beginning of 2026. This forms the basis for the Fund’s first distribution of the year to investors in Q2 2026, in the amount of approximately one million euros. The distribution is based on dividends and income received from all underlying funds, as well as interest from the Invego Uus-Järveküla OÜ and the Menulio 7 office building shareholder loans. The distribution does not include the profit from the Invego Uus-Järveküla development project, which the Fund plans to distribute largely in the second half of the year.
Since EfTEN United Property Fund’s portfolio is diversified across nearly 50 different properties in the Baltic states, developments across all segments of the regional real estate market affect the Fund’s results. There have been no major changes in the Baltic commercial real estate market over the last few quarters. In the residential real estate market, however, sales of new developments have improved in all Baltic states. In Tallinn, monthly sales of new developments grew to approximately 160 units per month in Q1 2026, compared with an average of around 100 units in 2024 and the first half of 2025. The biggest jump in the Baltic states was made by the Vilnius new-development market, where — partly thanks to expectations of funds being released from the second pension pillar — Q1 2026 sales volumes reached all-time highs, at times reaching up to 700 units per month.
The pace of sales also remained strong at the start of the year in Invego Uus-Järveküla OÜ, the development company for the Uus-Järveküla residential district in which EfTEN United Property Fund holds an 80% stake. In the first quarter, 22 units were sold (real rights contracts signed) and reservation agreements were concluded for three terraced houses. As of the end of the quarter, 8 terraced houses in the development remain unreserved. In March, Invego Uus-Järveküla OÜ repaid its entire bank loan and returned the shareholder loan to the Fund in full (1.51 million euros) along with the accrued interest (56 thousand euros). EfTEN United Property Fund invested a total of 3.52 million euros in the Uus-Järveküla development project in 2021 and 2023, and has to date received 4.8 million euros back.
Today, 2.2 billion people lack access to safely managed drinking water, and 3.5 billion people live without safely managed sanitation (UNSD, 2024). Action is urgently needed. AIIB’s recent Where the Water Flows report offers clear pathways for addressing these challenges in an increasingly destabilized hydrological environment. Yet, financing remains insufficient: an additional USD 140.8 billion in investment is needed annually to meet SDG targets 6.1 and 6.2 by 2030 (World Bank, 2024).
Traditional water funding modalities – tariffs, taxes, and transfers – are under strain, jeopardizing sustained investment and potentially widening the funding gap. Innovative governance models and financing solutions have a critical role to play in this evolving landscape. As the World Bank operationalizes its new global initiative Water Forward, there is a growing need for alignment and dialogue on the strategic allocation of capital for water, alongside the potential of new financing and governance models.
This event, held on the sidelines of the IMF and World Bank Spring Meetings, convened water finance practitioners actively leveraging innovative governance and financial approaches to fund water in emerging markets.
Opening remarks were delivered by Zou Jiayi, President and Chair of the Board of Directors, AIIB.
Speakers included:
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