A year ago I started to put some of my savings in investments, and to start safely, I bought eurozone government bonds ETF's. One year later, these are down 17%.
At first I was astonished how that could happen: the underlying bonds will give you a certain amount of money after a certain date, not more than that, and if many people are willing to pay more for the underlying bond than that amount, e.g. if you think it's safer or cheaper than keeping it on the bank or under your mattress, it won't be by much. The risk of a country defaulting seems low, several of them at once even lower. In any case, if you really want, I guess you can find out the approximate value (to you, of the underlying assets) quite easily, and naively it seemed very unlikely that the market would greatly over- or underestimate this value.
On the other hand, if there are enough naive people like me that just assume this to be the case, everything can happen: we just buy it at the market price without analyzing the value ourselves. Even an informed trader could buy it at a price higher than reasonable for the underlying bonds, under the assumption that he can later sell it at a profit to someone like me, if there are enough of us .
Can it generally be assumed that the market value would be strongly correlated to an underlying value (which in this case should have been quite easy to estimate, no visionary powers needed)? How would the market correct for it? Was there a bubble due to the ETF obfuscating the underlying assets? Is there some fundamental misunderstanding on my side?