Interest rate returns for bonds and investment accounts just are not what they used to be! Below is a graph showing the historical fall in bond yields, followed by a graphic revealing the historical decline of interest rates.
Fall in Bond Yields:
It really is more difficult to find good high yield bonds these days. Investors looking for high yields must be willing to take more risks.
The decline in interest rates seems to be prevalent across the developed world:
There are three reasons frequently given for the above declines:
- Slowed Productivity
This may explain some recent declines, but it does not explain the long historical trend.
- Demographic Decline
This is a recent phenomenon, and cannot explain long-term historical trends.
- Slowed Economic Growth
This reason may be secondary to #1 and #2 above. It should not be used as a primary explanation.
… interest rates and bond yields appear to slope across a similar trend line. While it may seem remarkable that interest rates keep falling, this phenomenon shows that a broader trend may be occurring—across centuries, asset classes, and fiscal regimes.
In fact, the historical record would imply that we will see ever new record lows in real rates in future business cycles in the 2020s/30s
Although this may be fortunate for debt-seekers, it can create challenges for fixed income investors—who may seek alternatives strategies with higher yield potential instead. __ Visual Capitalist
It is likely that different forms of debt would display similar trend lines over long spans of time, as we see above. As noted at Visual Capitalist, this phenomenon makes it more difficult for fixed income investors to find higher yields — without being exposed to very high risk.