By Charlie Bilello
Compound Capital Advisors
Over the past 40 years, bond yields have largely moved in one direction: down.
The 10-Year Treasury went from a yield of 15.84% in 1981 to an all-time closing low of 0.52% in 2020.
This has been a blessing for bond investors because prices move inversely to yields. And, over the last two years, as yields plummeted to historic lows, bond investors have experienced extraordinary gains.
But, that was the past. What has served as a tailwind for decades (falling rates) is now a major headwind. There is simply no escaping bond math, which has shown that lower yields portend lower future returns.