Charts of the year: the big moments for gilts, crypto and the dollar

For most investors, 2022 was a year to forget. Collapsing stocks were bad enough, but with bonds also suffering from a surge in inflation and an aggressive central bank response, fund managers often had nowhere to hide. Fierce hedge funds that can bet on the dollar and against government debt are among the few having a good year.

It has also been a year marked by truly extraordinary events, in areas as staid as UK government bonds and as wild as crypto. Here, Financial Times reporters have selected their market charts of the year, summarizing the biggest moments and strongest trends.

The bond market that turned

Rising inflation and a global rise in interest rates have made for a miserable year for bond investors.

The 16 percent decline in the Bloomberg Global Aggregate Bond Index - a broad gauge of government and corporate debt - is the worst performance in data going back to 1991 and dwarfs all other relatively rare annual downturns for fixed income over the past three decades.

At the start of 2022, investors and central bankers were still clinging to the idea that runaway inflation could be tamed through relatively modest interest rate hikes. But the commodity price shock following Russia's invasion of Ukraine dashed these hopes. Inflation surprised positively throughout most of the year, even as central banks in the US, UK and Eurozone embarked on one of the fastest tightening cycles in history.

The 10-year U.S. Treasury yield - a benchmark for global fixed income - peaked above 4.3 percent in October after starting the year at around 1.5 percent, contributing to a 20 percent decline in global stocks. Yields have since fallen back to 3.9 percent as U.S. inflation slowed - the latest data for November showing a decline to a relatively tame 7.1 percent annual rate, from a peak of over 9 percent earlier in the year. But investors will be looking for further confirmation that price pressures in the U.S. and elsewhere are easing before declaring an end to a brutal bond sell-off.Tommy Stubbington

Gilts gone wild

Even in a year of unprecedented volatility in bond markets, the UK stood out. When Liz Truss proposed a £45 billion package of unfunded tax cuts during her 44 days as prime minister in September, the gilt market collapsed.

Investors were unsettled not only by the scale of the planned borrowing, which came on top of the sizable bill for a widely expected energy subsidy for households, but also by the decision to move forward without analysis from the official budget watchdog.

The price of gilts collapsed, sending yields soaring. This in turn triggered a crisis in the UK pension sector, where many so-called liability-driven funds had loaded leveraged bets on low returns and were in desperate need of margin calls. As they sold long-dated gilts to raise the necessary cash, the UK government bond market entered a "self-reinforcing" downward spiral, according to the Bank of England, which was forced to intervene with an emergency bond-buying program. The swings in 30-year gilt yields on September 28, when the BoE first intervened, were wider on that single day than in most years.

Real calm only returned to the gilt market with the resignation of Truss and the abandonment of her tax cuts by her successor Rishi Sunak. It was widely seen as a victory for the so-called bond vigilantes, who rebuked a government that had overstepped the bounds of responsible fiscal policy.Tommy Stubbington

NatGas: Flamethrower

If there is one commodity that tells the story of 2022, it is natural gas, where Europe learned a hard lesson in energy geopolitics.

After the EU was dependent on Russia for 40 percent of its gas before Vladimir Putin's invasion of Ukraine, the struggle for replacement supplies from Moscow has dominated all other markets.

The Russian shortage of gas supplies began before the invasion, as Moscow tried to soften Europe for what was to come. But it peaked this summer when exports on the key Nordstream 1 pipeline to Germany were halted.

By August, prices had risen to over €300 per megawatt hour - or more than $500 per barrel in oil terms - fueling a cost-of-living crisis, runaway inflation and even fears of an economic collapse.

But the market worked. Europe has stored enough gas to start the winter, sucking up endless loads of liquefied natural gas as demand is curbed. So far there have been no real bottlenecks. Prices remain staggeringly high compared to the norm, but have more than halved since August.

Now concerns are already shifting to next winter, with a big question being whether Europe can replenish stocks while Russian supplies are almost completely cut off.David Schafer

The big nickel pickle of the LME

Nickel is typically a boring raw material used in stainless steel with a sexy growth story for its use in electric vehicle batteries, but it made headlines for all the wrong reasons in March.

The metal traded at an average of $15,000 per ton for years. But prices rose 280 percent in a single day to over $100,000 a tonne as fears of sanctions against Russia - a major nickel producer - rubbed shoulders with a bet on falling prices by Tsingshan, the world's largest stainless steel company, which has been building out huge nickel projects in Indonesia.

The historic price surge prompted the London Metal Exchange to suspend and cancel billions of dollars' worth of trading, triggering one of the biggest crises in the exchange's 145-year history, as participants who profited from it demanded nearly $500 million in damages and traders questioned why nothing was done sooner.

The full extent of the crisis became apparent later in the LME's defense against legal claims. Cash requirements for trading would have driven clearing members into bankruptcy, forcing the LME clearinghouse into default and even risking contagion in financial markets.

Since the trauma, traders have pulled back from using the LME contract for nickel, which serves as a global benchmark for producers and sellers to make deals. Thin liquidity has led to a return to volatile price swings.

The chaos in the nickel market is far from over – the LME will not find quick solutions to restore confidence in its contract and its tarnished reputation.Harry Dempsey

When crypto was cracked

The cryptocurrency industry is suffering from its own “Lehman moment,” with falling asset prices and a chain of failures by over-indebted and often poorly run market intermediaries. The biggest of all, of course, is the late FTX, whose founder Sam Bankman-Fried is now feeling the full brunt of criminal and civil cases that could land him a century in prison. The foundation for this crisis was laid at the beginning of Crypto, but the spark for the meltdown came in May.

That's when the Terra crypto token - an idea from Terraform Labs founder Do Kwon, who is now on the run - imploded. The so-called “stablecoin” should have a solid valuation of $1 a piece according to a scheme supported by algorithms and blind faith. But in May, its value collapsed to zero, taking with it large swaths of the crypto space, starting with its sister token Luna.

An abridged history of what happened next includes the failure of crypto hedge fund Three Arrows Capital, which was liquidated in June; Celsius Network (tagline: “debank yourself”), which filed for bankruptcy in July; and a host of other intermediaries who, ironically, were saved by Bankman-Fried at the time.Scott Chipolina

The Year of King Dollar

In a chaotic year for markets, one constant has been the U.S. dollar, which climbed to a 20-year high in September against a basket of six other major currencies - up 26 percent since May 2021.

The dollar has devastated a host of other currencies, including the euro, which sank to parity against the dollar in July, and sterling, which plunged to all-time lows after September's disastrous "mini" budget. China's renminbi also hit its lowest level since 2007, while Japan broke with tradition and intervened heavily to strengthen the yen - which it has tried for years to push down rather than up.

Support for the dollar came as investors searched for a haven to park their money as rising inflation and Russia's invasion of Ukraine hit global financial markets.

Now US inflation appears to be falling and so is the dollar. Slowing U.S. economic growth and growing expectations of a so-called Federal Reserve "pivot" to slower rate hikes or even cuts in 2023 amount to a "recipe for a weaker dollar," says Kit Juckes, macro strategist at Société Générale.

Others aren't so sure. The greenback may have peaked, they argue, but that doesn't mean it will fall further next year.

“Our basic view is that central bank tightening during recessions will support the dollar for a little longer than most expect,” said Chris Turner, global head of markets at ING.George Steer

How the ruble got out of trouble

Russia's ruble became an unlikely comeback child this year. It is stronger against the dollar today than it was before Russia's invasion of Ukraine began, having recovered from a sharp decline in the first weeks of March.

The currency initially lost value after the war broke out, falling to about 130 against the dollar in the days and weeks after Russia's central bank more than doubled interest rates to 20 percent in late February to calm the country's financial markets.

However, its resurgence does not reflect a wave of investment into Russia. Instead, Putin's imposition of strict capital controls and blockades on foreign traders seeking to abandon their investments helped the ruble recoup those losses by April.

The end of the year saw a renewed period of ruble weakness, leaving the currency at 72 to the dollar.George Steer