Understanding bonds

Don’t be too shortsighted in fixed income

March 09, 2023

Three hypothetical interest-rate scenarios are shown. If interest rates rise 1 percentage point, estimated one-year returns would be 3.4% for short-term bonds, –0.5% for intermediate-term bonds, and –11.7% for long-term bonds. If interest rates stay unchanged, estimated returns would be 4.3% for short-term bonds, 3.6% for intermediate-term bonds, and 3.7% for long-term bonds. If interest rates decline by 1 percentage point, estimated returns would be 5.1% for short-term bonds, 7.8% for intermediate-term bonds, and 19.1% for long-term bonds. Short-term bonds are represented by the Bloomberg U.S. Treasury 1–3 Year Index, intermediate-term bonds by the Bloomberg U.S. Treasury 3–10 Year Index, and long-term bonds by the Bloomberg U.S. Long Treasury Index.


John Croke, CFA
Samuel Martinez, CFA
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