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August 31, 2015 at 08:00 PM
Despite the future prospect of interest rate hikes by the Federal Reserve and a debt binge by corporate America, the U.S. bond market has proved doomsayers dead wrong.
The total U.S. bond market, as tracked by Vanguard’s BND ETF, has registered six yearly gains over the past seven years and is ahead around 0.50% since the start of this year. In 2013, BND posted a negative return but losses were modestly down just –2.13%.
Although bonds have tiny gains thus far this year, they’re still outperforming other major asset classes like gold and global real estate.
ETFs tracking U.S. Treasuries with maturities of 20 years or longer are the most sensitive to any spikes in interest rates and have delivered flat YTD returns of just 0.19%. As a result, the performance of both long-term Treausry bullish (TMF) and bearish (TMV) leveraged ETFs — which tend to perform best in sharply trending markets — have been poor.
