Bonds are remunerated again

The chart below is quite remarkable. U.S. Treasuries with maturities of 15 years and more are now showing a 10-year rolling nominal total return of around -2% — the worst outcome on record going back to 1793.

Our decision at ECP to keep bond duration short over recent years therefore appears to have been the right one. But these numbers are backward-looking. For investors buying a 10-year U.S. Treasury today and holding it to maturity, the picture is very different: the yield is around 4.77% per year.

After years in which fixed income offered very little compensation for taking duration risk, bonds are remunerated again. The starting yield matters — and fixed income has once more become a genuine component of portfolio construction.