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And Why You May Not Want to Give Up on Them Quite Yet

I know I’m not the only one who has been watching more movies lately due to the stay-at-home measures brought on the COVID-19 pandemic. As a result, I’ve rediscovered the brilliance of James Bond. From the days of Roger Moore in Moonraker to Daniel Craig in Sky Fall, from skiing through the Alps to dangling from a jet, I can binge watch Bond for hours on end. The suave hero always manages to save the day, with perfect hair and a crisply pressed suit. (Neither of which, perfect hair or crisp suit, have I had in quite some time…)

Unlike the adventures of our dynamic and charming James Bond, bonds as a financial instrument have become very boring lately. During the pandemic in 2020, the 10-year Treasury bond, which is used as a gauge for the overall bond market, dropped to an annual yield of 0.38%, the record low for Treasury bonds.1

Historically, the 10-year Treasury bond has yielded around 4.38%.2 Rates have risen lately but are still only about 1.5%.3 Needless to say, this is not the type of return most investors are seeking to help them reach their financial goals. Factoring in even a modest amount of inflation results in negative real rates of return.

Historical Yield on 10 Year Treasury Bond

Although the 10-year U.S. Treasury is typically used as a benchmark for the overall bond market, there are many different types of bonds that have varying yields. As our CEO, Peter Mallouk, likes to say, “Bond is just a fancy term for loan.” You can loan money to federal or state governments, a municipality, or a corporation and receive interest payments and principal at maturity. With a bond, you are loaning money, as opposed to a stock where you are purchasing a fract