Charting Retirement is a weekly snapshot of retirement-related data.
From 1946 to 1981, yields on Government of Canada long bonds rose more than 12 percentage points. They then fell an equal amount from 1982 to 2017. Rising yields are bad news for both stocks and bonds while falling yields are favourable to both. This largely explains the relatively poor real returns in the 36 years ending in 1981 and the very good returns since then.
We could be at the beginning of a new supercycle for bonds, which could mean mediocre returns for many years to come. That means younger savers will need to save more than their parents did.
The 72-year cycle for bond yields
12-year average real returns
ending in year shown
Long-term
bond yields
16%
14
12
10
8
6
4
2
0
-2
1946
1953
1960
1967
1974
1981
1988
1995
2002
2009
2016
the globe and mail, Source: bloomberg;
frederick vettese
The 72-year cycle for bond yields
12-year average real returns
ending in year shown
Long-term
bond yields
16%
14
12
10
8
6
4
2
0
-2
1946
1953
1960
1967
1974
1981
1988
1995
2002
2009
2016
the globe and mail, Source: bloomberg;
frederick vettese
The 72-year cycle for bond yields
12-year average real returns ending in year shown
Long-term bond yields
16%
14
12
10
8
6
4
2
0
-2
1946
1953
1960
1967
1974
1981
1988
1995
2002
2009
2016
the globe and mail, Source: bloomberg; frederick vettese
Source: Calculations by the author using the Canadian Institute of Actuaries economic statistics. The portfolio is assumed to be invested 60 per cent in stocks and 40 per cent in long-term government bonds. Investment fees of 0.5 per cent were deducted from annual returns.
Frederick Vettese is former chief actuary of Morneau Shepell and author of Retirement Income for Life.