Treasury Bonds Are the Only Bonds You Need

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Because Treasury bonds are the safest fixed-income securities, they have the lowest yields in the U.S. dollar universe. This can make them seem boring in a portfolio; something you must own to be prudent, but a drag on higher returns. The reality is different and will surprise you.

This article compares the performance of the premier investment-grade bond index, the Bloomberg Barclays Aggregate Bond Index (AGG), to the performance of its subset U.S. Treasury index. Surprisingly, the long-term performance of the Treasury index is nearly that of the AGG, and outperformed it in several crucial periods.

Treasury bonds perform nearly as well as investment-grade bonds over the long-term.

The AGG captures the performance of U.S. taxable investment-grade bonds. This includes Treasury bonds, investment-grade corporates, mortgage-backed bonds (MBS), commercial mortgage-backed bonds (CMBS), and other asset-backed bonds (ABS). Some of the largest and most familiar bond funds use the AGG as a benchmark, including the PIMCO Total Return Fund (PTTRX) and DoubleLine Total Return Bond Fund (DBLTX).