US bond market shows little capital appreciation, analysis finds

A recent analysis of historical bond index data shows that price returns for most bonds have been close to zero, meaning virtually all total returns have come from coupon yields rather than capital gains. While bond prices can move with changes in market interest rates, the underlying par value at maturity does not increase.

The study notes that during the Federal Reserve’s aggressive rate hikes in 2022, long‑term Treasury bonds fell more than 30% and other bond categories dropped 12% or more. Conversely, when the Fed cut rates sharply in 1982, long‑term Treasuries rose about 26% and other bonds posted double‑digit gains. Credit quality also influences bond prices, especially when investors doubt an issuer’s ability to meet obligations.