On November 2nd, the Fed approved another 75 basis point rate hike.

But since then, the yield on 10-year U.S. Treasury bonds has dropped from just over 4.1% down to 3.8%.

In other words, while interest rates set by the Fed have increased, bond yields have decreased.

Bonds have been the story of the year.

In fact, intermediate term U.S. Treasury bonds are on track for their worst year in history down close to 11 percent year to date. If the year ended today, this would only be the sixth

time in over 50 years that intermediate term treasuries have had a negative

calendar year return. And historically, those negative returns have only been around 1% or less.

Given their current year performance, especially when compared to history, it's no surprise

that investors are concerned about the bonds in their portfolio.

Welcome to the Stay Wealthy podcast. I'm your host, Taylor Schulte. And to help address those concerns, I'm covering three things today. Number one, why bond yields are not moving in

lockstep with interest rates set by the Fed. Number two, how long it takes for bond losses

to recover. And number three, why retirement savers

should maintain exposure to bonds for the long run. For the links and resources mentioned today,

just head over to you staywealthy.com forward slash 173. The bond market is wildly complex, and the reason for owning bonds is different for every investor.

For some, bonds are speculative. They're bought and sold throughout the day in an attempt to

outsmart the markets. For others, bonds are used to improve their risk-adjusted returns

during the accumulation phase of life. In other words,

adding some bonds to a diversified portfolio of stocks can actually help to reduce risk and also

improve long-term returns. For my clients who are in retirement or close to it, bonds are

used primarily as a diversifier. And for that reason, we only invest in AAA-rated

treasury bonds and tips versus riskier corporate or municipal bonds. You see, the more risk

you take with bonds, the more they begin to behave like stocks during catastrophic events.

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