Line graph compares the yield of the 10-year U.S. Treasury Note with the Bloomberg Barclays U.S. Aggregate Bond Index duration.
Left Y-axis: Yield (%), right Y-axis: Duration (in years); X-axis: 1989-2021
During this period the 10-year U.S. Treasury yield has declined from nearly 9% in January 1989 to about 1.5% at the end of Q3 2021. At the same time, duration has increased from just over 4.5 years in January 1989 to over 6.7 years at the end of Q3 2021.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 1989 to September 30, 2021. Yields represent past performance and fluctuate with market conditions. Current yields may be higher or lower than those quoted above. Past performance is no guarantee of future results. Duration is a measure of interest rate sensitivity.
- The overall low-rate environment not only encouraged companies to issue longer-dated maturities but also naturally increased the duration of new-issue securities.
- A higher duration makes bond prices more sensitive to changes in the levels of interest rates. Hence, rising long-term rates poses a more significant impact to fixed-income investors.