In 2010, the 10-year Treasury yield fell from 3.8% on New Year's Day to 2.5% at summer's end, thereby raising the question: Are bond prices in a bubble? Fortune wondered in April of that year. A few months later, three Harvard economists tackled the topic. By then, the debate had become familiar. Were bond yields at 50-year lows for good reason, or had the movement been speculative?
Today, we know the answer. That was no bubble. In the ensuing eight years, the 10-year Treasury yield has ranged between 1.5% and 3.0%, with its midpoint hovering just above 2010's low. With annual inflation averaging 1.8%, the real return on the Treasury has been only slightly positive--but positive it has been, nonetheless. Bubbles don't lead to portfolio gains.