What if you bought US Treasury bonds in 1990?
Bonds & cash · Government. The hindsight answer, year by year, against the only benchmark that matters.
Could you have picked it? Play5.2× · S&P 500 same money: $19,429
$1,000 in US Treasury bonds at the start of 1990 would be worth about $5,200 today. A plain S&P 500 index fund over the same years would have made more — the boring option won.
The story
US Treasury bonds are loans to the American government, the asset the rest of the financial system treats as risk-free. In 1990 ten-year yields were around 8 percent, a hangover from the inflation of the 1970s. Over the following three decades inflation fell, central banks gained credibility and yields declined almost without interruption, which meant bondholders collected interest and also enjoyed rising prices. In both the dot-com bust and the 2008 crisis, Treasuries rose while stocks fell, exactly what a hedge is supposed to do.
That long tailwind ended abruptly. In 2020 ten-year yields hit record lows below 1 percent, leaving almost no cushion. When inflation surged in 2021-22 and the Federal Reserve raised rates at the fastest pace in decades, bond prices fell sharply, and 2022 was among the worst years for Treasuries on record. A balanced portfolio that saw stocks and bonds fall together learned that the familiar diversification is not guaranteed.
The lesson: Bonds bought at very low yields carry real price risk, because the starting yield is the best guide to future bond returns.
$1,000 invested at the start of each year
| Bought in | Price then | Worth today | S&P 500 would be | Multiple |
|---|---|---|---|---|
| 1990 | $100 | $5,200 | $19,429 | 5.2× |
| 1995 | $150 | $3,467 | $14,783 | 3.5× |
| 2000 | $215 | $2,419 | $4,626 | 2.4× |
| 2003 | $280 | $1,857 | $7,727 | 1.9× |
| 2005 | $300 | $1,733 | $5,763 | 1.7× |
| 2007 | $320 | $1,625 | $4,789 | 1.6× |
| 2008 | $350 | $1,486 | $4,626 | 1.5× |
| 2010 | $400 | $1,300 | $6,071 | 1.3× |
| 2012 | $460 | $1,130 | $5,312 | 1.1× |
| 2015 | $480 | $1,083 | $3,301 | 1.1× |
| 2018 | $490 | $1,061 | $2,519 | 1.1× |
| 2020 | $560 | $929 | $2,092 | 0.9× |
green = beat the S&P 500 · red = lost money
Best entry point in our set: 1990, turning $1,000 into $5,200. The S&P 500 from that same year: $19,429.
On this day
- 4 February 1994: The Fed starts the great bond massacre
- 18 March 2009: The Fed fires its bazooka
- 15 June 2022: The Fed hikes 75 basis points
- 5 August 2011: S&P strips the US of its AAA rating
- 27 August 2020: The Fed changes how it targets inflation
Now try it without hindsight. The wheel decides the year and the asset class, you pick the position, ten seconds a pick, and we simulate to today. US Treasury bonds is one of 258 positions on the wheel — including the ones that went to zero.
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