This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
For many investors, Monday’s bond market closure was a welcome reprieve from one of the most challenging periods for fixed income in years.
And by some measures, what’s been happening in the bond market has produced the worst results for investors on record.
Data from Bespoke Investment Group published last week showed that annualized returns over the last 20 years for long-dated Treasury notes and bonds have never been worse, as measured by the BofA Merrill Lynch 10+ Year US Treasury Index.
And returns over shorter periods for these instruments have hardly fared much better.
Over the last 2-, 5-, and 10-year rolling periods returns for long-dated Treasuries have been better more than 99% of the time. Only returns over the last year for this index are above the first percentile for historical returns.
According to Bespoke’s data, annualized total returns over the last 1-year, 2-year, and 5-year periods are now negative for investors in long-dated Treasuries. Investors in long-dated Treasuries have experienced annualized losses of 17.6% over the last two years. In the last 10 years, these returns are just barely positive, clocking in at 0.8% per year.
Over the last 45 years, in contrast, the average annual return for long-dated Treasuries over rolling 1-, 2-, 5-, 10-, and 20-year periods is above 8%.
Market history, in other words, would have more than bolstered claims that you’d be unlikely to lose great sums of money betting on bonds.
Market reality is another story.
In recent weeks, pressure in the bond market has been blamed for the sell-off in stocks.
And while strategists have struggled to flag a single cause for the rise in yields, the symptoms matter more than the disease — at least right now.
Investors who perhaps viewed bonds as a safer investment because, as the name implies, the income received is fixed, have seen that worldview crumble. How investors try to put these pieces back together will have a large role to play in how markets behave in the final three months of the year.
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