Expert perspective

Rising rates don’t negate benefits of bonds

April 06, 2021

Roger Aliaga-Díaz

Vanguard Americas Chief Economist

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Rising bond yields mean lower bond prices
Daily yield of the 10-year U.S. Treasury note, January 2, 2020–March 22, 2021
Figure shows the yield of the 10-year U.S. Treasury bill from January 2, 2020, through March 22, 2021, including a rise of more than 100 basis points since August 2020, according to Treasury Department data. Rising bond yields mean lower bond prices.
Bond investors should hold, not fold

Renzi-Ricci, Giulio, and Lucas Baynes, 2021. Hedging Equity Downside Risk With Bonds in the Low-Yield Environment. Valley Forge, Pa.: The Vanguard Group.

Here are three common myths that investors should avoid:

Myth #1: Bonds are a bad idea—abandon the 60/40 portfolio.

Myth #2: Go to cash—avoid duration risk.

Myth #3: When interest rates are rising, don't just stand there—do something!

Watch the road ahead

The elephant in the room—inflation

Where active can shine

Bosse, Paul, 2019. Commodities and Short-Term TIPS: How Each Combats Unexpected Inflation. Valley Forge, Pa.: The Vanguard Group.

3 For the 10-year period ended December 31, 2020, 38 of 44 actively managed Vanguard bond funds outperformed their peer-group averages. Results will vary for other time periods. Only funds with a minimum 10-year history were included in the comparison. (Source: Lipper, a Thomson Reuters Company.) Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at vanguard.com/performance.

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