It’s been a terrible, horrible, no good, very bad decade for bonds. It’s not just an inflation story, real yields are at a record. Whether it’s growth, deficits or central banks, there’s a lot of upward pressure. Any asset can be attractive at the right price. The first cracks are showing in credit. Higher rates are good for some assets. Why would I lie to you?
1. U.S. long-term bonds just had their worst decade on record going back to 1793, losing just over 2% a year before inflation:
Source:
2. Investors are demanding higher real returns to own bonds:
Source: John Authers, Points of Return on 9/29/2026
3. With nominal GDP growth running above 6%, rates may still be on the lower side of fair:
Source: @steve_donze via the Daily Chartbook on 9/24/2026
4. The U.S. runs one of the largest budget deficits in the developed world:
Source: Simon White, Bloomberg via the Daily Chartbook on 8/27/2026
5. Yet the deficit hawks are nowhere to be found:
Source: John Authers, Points of Return
6. Central banks have spent most of the last four years shrinking their balance sheets:
Source: Chartbook a newsletter from Adam Tooze
7. Remember, investing means buying future returns, not past ones:
Source: John Authers, Points of Return
8. Credit spreads are finally showing signs of life. CCC spreads are above 10 percentage points while B and BB spreads have only just started to move:
Source: Bloomberg Odd Lots
9. The dollar is at its strongest level in over a year:
Source: Koyfin via the Daily Chartbook on 10/1/2026
10. AI has gotten much better at telling the truth:
Source: @AndrewCurran_
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A real yield is the yield on a bond after adjusting for expected inflation; it is commonly measured by the yield on Treasury Inflation-Protected Securities (TIPS). Nominal GDP is the total value of goods and services produced in an economy measured at current prices, without adjusting for inflation. The 10-Year Treasury Yield represents the interest rate on U.S. government debt securities with a maturity of ten years and is commonly used as a benchmark for long-term interest rates. The primary budget deficit is a government’s budget deficit excluding interest payments on its debt. A central bank’s balance sheet reports the assets it holds, such as government bonds and other securities acquired through asset purchases, and the liabilities, such as currency and bank reserves, that fund them. The S&P 500 Index measures the performance of 500 large-capitalization U.S. companies. The earnings yield spread is the difference between the earnings yield of an equity index (its earnings divided by its price) and a government bond yield, often used to compare the relative valuation of stocks and bonds. The Bloomberg US Corporate High Yield Index measures the performance of U.S. dollar-denominated, fixed-rate, below-investment-grade corporate bonds; its sub-indices group bonds by credit rating (such as BB, B and CCC/Caa). The U.S. Dollar Index is a geometrically-averaged calculation of six currencies weighted against the U.S. dollar. Inflation is the rate at which the general level of prices for goods and services rises over time, resulting in a decline in purchasing power. Gross domestic product (GDP) is the total monetary value of all finished goods and services produced within a country’s borders during a specific period and is a broad measure of overall economic activity. A credit spread is the difference in yield between a corporate bond and a government bond of similar maturity, reflecting the additional compensation investors require for credit risk.
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