One’s perception of interest rate trends depends very much on the time frame chosen. It is well known that long-term interest rates peaked in 1981 and then plummeted to about the 2-per-cent level over the next 40 years. Less well known is that this period represents just half of a longer-term cycle as interest rates had risen steadily from the 2-per-cent level in 1940 to the peak in 1981.
As of Thursday morning, the 10-year U.S. Treasury yield is 4.70 per cent while the yield on Government of Canada 10-year bonds is 4.14 per cent. Thus, yields are very close to the top end of the long-term range of 2 per cent to 5 per cent. There are two main scenarios for bond yields in the next few years.
An easy way to do this is to buy units in an exchange traded fund that is dedicated to long-term bonds. If yields do in fact fall, it will result in double-digit returns for bond holders.
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