If you're like most investors, you own at least some long-term Treasuries. Unfortunately, these popular investments are likely to suffer a "lost decade," says a top investment research group.
It's now been five years since 10-year Treasuries' yield plunged to a record closing low of 0.5069%, says Bespoke Investment Group. Since then, yields have risen to 4.19%. And that rise in yield has pummeled the prices on long bonds, which move in the opposite direction of yield.
In just five years, the iShares 20+ Year Treasury ETF (TLT) has plummeted nearly 50%. Ouch.
"It's only been five years to this point, but it's starting to look like a lost decade for long-term Treasuries," Bespoke said.
And it's not just long-term Treasuries taking the hit. Nine out of the 10 largest bond ETFs by assets are down on a price basis in the past five years.
The largest, the $133.4 billion-in-assets Vanguard Total Bond Market ETF (BND) is down 17.7% in the past five years. It's now yielding 3.8%.
The only large bond ETF to escape the pain is the super short term iShares 0-3 Month Treasury Bond ETF (SGOV). But it's only up 0.4% to yield 4.45%.
Adding to the pain of holding bonds, is the lost opportunity. By owning bonds, investors missed out on hefty stock market gains in the past five years.
Big caps are the champs. The S&P 500 is up more than 90% in five years, Bespoke says. And the Nasdaq 100 is up even more: 109%.
"One of the factors helping Nasdaq 100 stocks is that they tend to have little debt, especially the megacaps," Bespoke said. "Therefore, they haven't been burdened by higher costs of debt servicing, as is the case with more capital-intensive companies."
It sure beats a lost decade of dead money.
From yield low five years ago
| ETF | Symbol | Five-year ch. % | Assets, $ bils. |
|---|---|---|---|
| Vanguard Total Bond Market | BND | -17.7% | $133.4 |
| iShares Core U.S. Aggregate Bond | AGG | -17.0% | 128.5 |
| Vanguard Total International Bond | BNDX | -15.2% | 68.2 |
| Vanguard Intermediate-Term Corporate Bond | VCIT | -14.3% | 54.1 |
| iShares 0-3 Month Treasury Bond | SGOV | 0.4% | 52.7 |
| iShares 20+ Year Treasury Bond | TLT | -48.5% | 47.7 |
| SPDR Bloomberg 1-3 Month T-Bill | BIL | -0.1% | 41.6 |
| iShares MBS | MBB | -15.3% | 40.2 |
| iShares National Muni Bond | MUB | -10.8% | 38.7 |
| Vanguard Short-Term Bond | BSV | -5.6% | 38.3 |
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