The Digester

Study: Wars and pandemics produce big real losses for government bondholders

Mar 20th 2026

A CEPR analysis of 300 years of U.S. and U.K. history finds wars and pandemic-scale emergencies trigger inflation and financial repression that cut average real bond returns by about 14 percent in the first four years.

  • CEPR's 300-year dataset shows bondholders suffered average real losses of roughly 14 percent during the first four years of conflicts.
  • Cumulative inflation averaged about 20 percent in the first four years of wars, eroding the real value of government debt.
  • Governments increased spending by about 7 percent of GDP on average during the first four years of wars, and tax hikes rarely covered the cost.
  • Policy responses such as suspending gold standard commitments and financial repression, including yield-curve control and massive bond buying, often kept yields below inflation.
  • The findings matter for the United States as it carries roughly $39 trillion in national debt and has seen Treasury yields rise amid the current Iran conflict.

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