A Comprehensive Guide to US Treasury Bonds Rates History

The US Treasury bond market has a rich history, with rates fluctuating over the years in response to economic conditions. The average annual return on a 10-year Treasury bond has been around 4.5% since 1962.

In the 1970s, high inflation led to rising interest rates, with the 10-year Treasury bond reaching a peak of 15.3% in 1981. The subsequent recession led to a decline in interest rates.

The 1990s saw a period of low inflation and stable interest rates, with the 10-year Treasury bond averaging around 7.5% per year. This stability made Treasury bonds an attractive investment option during this time.

The 2008 financial crisis led to a significant drop in interest rates, with the 10-year Treasury bond falling to around 2% in 2009.

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The US Treasury bond market has a long history, with the first auction held in 1929.

The 30-year bond rate has fluctuated significantly over the years, with a high of 8.94% in 1981 and a low of 1.93% in 2016.

The average annual return on 10-year Treasury bonds from 1962 to 2020 was 4.94%.

This steady return has made 10-year Treasury bonds a popular choice for investors seeking stable income.

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To create a comprehensive history of US 10-year bonds, it's essential to have reliable data sources. The data for the 100-year history of US 10-year bonds was sourced from multiple places.

The earliest data available is from 1926 to 1962, which is based on monthly US 10-Year Bond Yields from the Federal Reserve Economic Data website. This data is a valuable resource for understanding the bond market during that period.

From 1962 to 2002, daily US 10-Year Bond Yields were used, also sourced from the Federal Reserve Economic Data website. This data provides a more detailed picture of the bond market during the latter half of the 20th century.

The most recent data, from 2002 to 2022, was obtained from the iShares 7-10 Year Treasury Bond ETF, which is listed on the Yahoo Finance website. This data allows us to examine the bond market in the 21st century.

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Data Integration is a crucial step in creating a comprehensive time series. We combined four different periods of data sources into one time series.

Each period has its own unique characteristics. From 1926 to 1954, we used linearly interpolated daily total return. This method allowed us to fill in the gaps in the data.

In 1954, we switched to a volatility proxy extrapolated daily total return, which we used until 1962. This change in methodology helped us to better capture market fluctuations.

The next major shift occurred in 1962, when we started using total return from daily US 10-Year Bond Yields. This data source provided a more stable and consistent measure of returns.

Finally, from 2002 to 2022, we used the IEF ETF (iShares 7-10 Year Treasury Bond ETF). This exchange-traded fund offered a convenient and liquid way to track the performance of the 10-year treasury bond market.

Here's a summary of the different data sources we used:

Bonds have been around for thousands of years, with the first recorded bond dating back to ancient Babylon around 1750 BCE.

In ancient Rome, bonds were used to finance public projects and wars, with the government issuing bonds to raise funds.

The first municipal bond was issued in the United States in 1790, to finance the construction of a road in Massachusetts.

The development of the stock market in the late 19th century led to the creation of corporate bonds, which allowed companies to raise capital from a wider range of investors.

By the early 20th century, bonds had become a staple of investment portfolios, with many investors relying on them for steady returns and relatively low risk.

The 1970s saw a significant increase in the use of bonds to finance government spending, with the US government issuing large amounts of bonds to finance its growing budget deficit.

Today, bonds continue to play a vital role in the global economy, with governments, corporations, and other organizations issuing billions of dollars' worth of bonds every year.

Understanding the Treasury is crucial in understanding how the US government works. The U.S. Treasury is the Cabinet-level department responsible for promoting economic growth and security.

It was established by the First Congress of the United States in 1789. The secretary of the Treasury is nominated by the president and must be confirmed by the U.S. Senate.

From 1926 to 1962, we worked with monthly yields to transform bond yields into total returns.

You can approximate the total return of a bond by earning the carry (yield to maturity) fraction equivalent to roughly 1/12 of the YTM every single month and revaluing the bond due to the change in this yield.

To calculate the total return for a specific month, you first need to calculate the duration. Excel has an in-build function, MDURATION, which calculates duration from the respective yield and date.

The main elements in the formula to calculate the total return are yesterday's total return, the number of days between the individual months, the average of two consecutive yields, the average of two consecutive values of duration, and the difference between today's yield and the last yield.

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A US 10-Year Bond had a total return calculated from monthly yields from 1926 to 1962.

Here's a breakdown of the main elements in the total return formula:

These elements are crucial in calculating the total return of a bond, which is essential in understanding the performance of Treasury bonds over time.

To calculate the total return of a bond, you need to have a time series of yields and duration for the bond. Fortunately, Excel has an in-build function, MDURATION, which calculates duration from the respective yield and date, assuming a zero-coupon bond.

The main elements in the formula to calculate total return are: yesterday's total return, the number of days between the individual months, the average of two consecutive yields, the average of two consecutive values of duration, and the difference between today's yield and the last yield.

Using a simplified approach, every single month, a bond earns carry (yield to maturity) fraction equivalent to roughly 1/12 of the YTM. This carry is then revaluated due to the change in this yield.

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To calculate the total return for a specific month, you need to know the duration of the bond. You can approximate duration from a time series of yields, but first, you need to decide whether you want to create a constant duration time series or constant maturity time series.

The formula to calculate total return is: Total Return = Yesterday's Total Return + (Number of Days / 365) * (Average Yield + Average Duration) * (Today's Yield - Yesterday's Yield).

Here's a breakdown of the formula's components: