Bond ladders for rising rates

Despite the fact that Treasury bond ladders did not lose money during the most recent secular bond bear market (date range is arbitrary), the returns were inadequate to cover inflation (which averaged more than 4 percent ).

It’s worth noting that bond ladders in all terms generated identical results.

Bond ladders have internal mechanisms that compensate for increases in market interest rates, which causes this to happen.

Shorter term ladders forego the advantages of higher long-term rates in exchange for the ability to adapt to rising rates more rapidly.

Longer-term ladders have higher long-term rates, but they respond to increasing rates more slowly.

The summary data for the subsequent secular bull market in bonds demonstrates how beneficial such markets can be—inflation averaged around 3%, resulting in real returns of 4% to 6%+, resulting in significant wealth gains.