300 years of bond markets: Lessons for investors today

Higher starting yields have made bonds more attractive again because income now provides a larger cushion and fixed income can once more diversify portfolios when riskier assets weaken.

• US Treasuries recorded their weakest rolling 10-year return in more than two centuries after an exceptional period of exceptionally low interest rates.
• Government bonds have generally delivered positive returns during recent US recessions and major equity-market declines, although they do not rise whenever equities fall.
• Short-dated bonds can provide defensive income and cash-management flexibility, while longer-dated government bonds offer greater potential gains if growth slows and interest rates decline.
• Current yields are near the upper end of their long-term historical range, and the approximately US$18 trillion peak in negatively yielding debt has fallen to zero.
• High government borrowing, bond issuance to finance fiscal deficits, and private-sector demand for AI infrastructure, data centres, grid connections and semiconductors could keep real and nominal yields elevated; corporate credit spreads are also near historically low levels.

Takeaway: Fixed income offers a more favourable risk-reward starting point for long-term portfolios, but investors should remain selective across countries, maturities and issuers rather than relying on broad bond-market indices.