Please explain to me what you think rates would have needed to do given that there was a massive decrease in economic activity due to a pandemic followed by inflation.
I think the real damage was done between 2008 and 2018, when we spent 10+ years under zero interest rates in the US and negative rates in parts of Europe. I think that conditioned people to forget about things like duration risk and interest rate risk. Had we been under a "normal" rate regime during that period, I don't think people would have thought 10 year t-bonds paying 1.5% were in any sense of the word a "good deal." I think peoples' expectations were so messed up that Austria (?) issued a 97 year zero coupon, zero interest rate bond. Like it was a good thing.
IMO? Overnight term rates should have been zero from 2020 to about July of 2021, then allowed to rise by 0.25 per month to perhaps about 3.5%. Long-term rates should have been left to float with the market, pricing in the expected risk of inflation. Not that my opinion matters, since I wasn't in charge.
Yes, of course it does. But there are losses, and then there are losses. 10-year yields going from 1.56% in 2021 to 4% in 2023 is equivalent to a price drop of 17% (given maturity in 2031). If 10-year yields had only been, say, 3% in 2021 before rising to 4%, the bond price drop would have been closer to 7%.