Excess Returns · Thursday, September 10, 2026
John Kirchner explains that the US aggregate bond index, heavily weighted towards Treasuries and mortgages, has a six-year duration and approximately 5% yield, creating significant interest rate risk without substantial yield. He suggests investors are not getting what they want from these funds.
“The problem with the US bond market is there's really one core main index, which is the aggregate index.”
“Because the aggregate these days is about a six-year duration. That means if interest rates go up 100 basis points, you actually lose 6% more or less.”
“But what that's giving you is a lot of interest rate risk without a huge amount of yield.”