Karishma Vanjani

On Aug. 4, 2020, the Treasury market's benchmark 10-year note closed at a record low yield of 0.51%. Its been five years since that fateful day, and investors have seen a large rebound in yields -- and along with it a terrible period of returns.

The 10-year Treasury yield has climbed over 3.7% or nearly 400 basis points, since it found its bottom in 2020. At the time, investors petrified of the economic impacts of Covid-19 rushed to buy up safe assets like U.S. government bonds, driving up their prices and pushing down their yields to historic lows. (Yields move in opposite direction of prices).

Buying a 10-year bond at a low, low yield of half a percent back then meant locking in very minimal income on that money for a decade, but guaranteed capital preservation as investors holding on until maturity would receive their initial principal back. For those who've sold it before maturity, however, the strategy has proved fatal.

"This period has delivered the worst rolling five-year total return for 10-year Treasuries (and historical proxies) on record," Jim Reid, Deutsche Bank's global head of economics and thematic research wrote in a note this morning titled "From half a percent to half a decade of hurt."

Barron's took a deeper look into returns, beyond just the 10-year Treasury note. The Bloomberg U.S. Treasury Total Return index, which includes Treasuries with a maturity of a year or more, has lost 9.13% from the end of July 2020 till last month's end. No other rolling five-year period, on a month-end basis, has offered a worse return for the index, according to Dow Jones Market Data.

The 10-year yield can be understood to be sort of a central point for other Treasury yields. As 10-year yields have moved higher in the market, the Treasury has issued newer bonds with higher coupons and that has reduced the value of future payments of existing bonds.

More specifically, if an investor used iShares 20+ Year Treasury Bond exchange-traded fund on Aug. 4, 2020, to bet on Treasuries and sold it now they would have lost 40.92% of their money. The worst five-year rolling period for this ETF was the period ending April 21, which bought a 42.05% decline.

Buying iShares Core U.S. Aggregate Bond ETF, which has 46% of its assets devoted to Treasuries and a slice to corporate bonds and mortgage-based securities, would have resulted in a loss of 4.75% if sold today, one of the worst rolling five-year periods for the ETF. The worst one ended on May 21 with a loss of 5.61%.

Taken together, it paints a grim picture of longer-term government bonds for this recent period as investors were unable to benefit from price increases.

But its hard to make an argument for a repeat of history. The rate on the 10-year Treasury, at 4.2%, is already relatively high and would need to climb meaningfully to around 8% to match the type of price declines seen over the past half a decade in longer-term Treasuries. Investors also stand to gain from better coupon rates now versus Covid-19.

Note: Data from FactSet and Tradeweb show the bottom for 10-year yields on March 9, 2020. That's because there isn't a universal "close" for the yields like there is for the stock markets, and different data sources take their closing snapshots at different time. Tullett Prebon and the Federal Reserve show the closing low on Aug. 4, 2020.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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August 04, 2025 14:29 ET (18:29 GMT)

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