August 30, 2008

Historical rates for corporate AAA bonds.

The federal reserve Economic Data - FRED site has information on various economic indicators including return rates for AAA rated bonds

From 1919 to 2008 the average rate for a AAA rated bond was 6%.

Here is a graph showing the history of AAA corporate bonds :

You'll notice that theres a peak there where bond rates were well over 10% for years and a short period when they went over 14%. From 1973 to 1992 the AAA rated corporate bonds averaged 10% return. By comparison in that same period the NASDAQ went from a value of about 115 to about 600 which is about 9% annual return. So for that 20 year period corporate bonds outperformed stocks (at least the NASDAQ).

By comparison from 1938 to 1968 bond yields were fairly low. In that period AAA rated corporate bonds only returned 3.5% per year on average. The NASDAQ on the other hand had a 9% annual average growth rate. So for 30 years from 1938 to 1968 stocks had 2.5 times the growth rate of corporate bonds.

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