You Just Can’t Get a Good High Yield Bond Any More!

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:

Bond Yields Historical Decline
Visual Capitalist via ZH

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.

Hundred Year Safe-Asset Average Rates from 1311 to 2018
Visual Capitalist

The decline in interest rates seems to be prevalent across the developed world:

700 Year Historical Decline in Interest Rates
Visual Capitalist via ZH


There are three reasons frequently given for the above declines:

  1. Slowed Productivity

    This may explain some recent declines, but it does not explain the long historical trend.

  2. Demographic Decline

    This is a recent phenomenon, and cannot explain long-term historical trends.

  3. 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

-Paul Schmelzing

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.

This entry was posted in Economics, History, Uncategorized and tagged . Bookmark the permalink.

1 Response to You Just Can’t Get a Good High Yield Bond Any More!

  1. Alexander Bryant says:

    Maybe because over that time period, more and more people have been getting spare income to invest, and access to the capital markets. More lenders (bond buyers) would exert downward pressure on yields.

    Also, maybe due to increasingly stable societies with better access to legal systems, which would lower the risk, and therefore the yield, of a bond.

Comments are closed.