In March 2020, the Covid-19 pandemic led to mass quarantines, travel bans, and business shutdowns. Fears of deflation and a global recession, or even depression, led to market panic. The S&P 500 fell 34%.1 The VIX spiked to record levels. 1 There was a sprint to cash, causing U.S. dollar funding stress. The 30-year Treasury hit its all-time trough in March 2020 at 0.997% – closing below 1% for the first and only time in its history. 1 Investors wondered if the U.S. would reach the negative interest rate levels that were present across Europe and Japan. Over 5 years later, we have the complete opposite environment. The S&P 500 hit new levels to end the first half of 2025.1The VIX is below its 25-year average. 1 Tariffs and geopolitical risk in the Middle East are evoking concerns around inflation. The 30-year U.S. Treasury, below the 1% threshold just over 5 years ago, surpassed the 5% level in the first half of 2025.1
What can we learn from the last 5 years?
One of the founding principles of our math-based, macro-agnostic approach, Shape Management, is that yield is not a good proxy for total return. In other words, yield is not what you get. However, while yield is an incomplete measure of total return, starting yields have historically been correlated with go-forward returns. Put differently, yield and total return are not the same, but starting yields can still hint at the direction of future return potential. Here’s what I mean. In August 2020, the Bloomberg US Aggregate hit its all-time low yield. 1 What followed was (and is) the longest bear market in bond history, at 58 months and counting. What preceded this unprecedented drawdown? Unprecedented low yields. Even though yields had reached all-time lows, investors added more than $445 billion to bond funds in 2020.2 Today, the picture for fixed income looks completely different, which should be understood as a very good thing for investors. While yields are not at unprecedented levels, yields across some of our favorite asset classes – long U.S. Treasuries, Tax-Exempt Municipal bonds, and Taxable Municipal bonds – are at levels rarely seen over the past few decades. We believe this presents a go-forward opportunity rarely available over the same period.
1- Source: Bloomberg (accessed 07/01/2025) 2- Source: Wall Street Journal (www.wsj.com)
Financial professionals only. Not for public distribution.
It must be repeated that our belief is that yield is not a good proxy for total return. However, today’s starting yields represent the relative opportunity at hand for investors. Yield increases over the past 5 years have been painful for investors along the way but represent a benefit to current and future bondholders going forward. With a forward-looking focus, we believe investors are primed for some of the most attractive return potential in recent history.
Financial professionals only. Not for public distribution.
Sources: Bloomberg (accessed 07/01/2025), JP Morgan, RBC, Wall Street Journal, Reuters, AP News and Liberty Street Economics.
Glossary:
Yield Curve refers to the U.S. Treasury yield curve rates.
Risks and Other Important Considerations
Investing involves risk; principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in asset-backed and mortgage-backed securities include risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. For a complete list of disclosures, please visit www.test.ptam.com.
The information included is not an offer, recommendation or professional advice. Certain information contained herein has been obtained from third party sources and such information has not been independently verified by PT Asset Management, LLC. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by PT Asset Management, LLC or any other person. While such sources are believed to be reliable, PT Asset Management, LLC does not assume any responsibility for the accuracy or completeness of such information. PT Asset Management, LLC does not undertake any obligation to update the information contained herein as of any future date. This email is confidential, is intended only for the person to whom it has been directly provided and under no circumstances may a copy be shown, copied, transmitted or otherwise be given to any person other than the authorized recipient without the prior written consent of PT Asset Management, LLC. Any indices and other financial benchmarks shown are provided for illustrative purposes only, are unmanaged, reflect reinvestment of income and dividends and do not reflect the impact of advisory fees. Investors cannot invest directly in an index. Comparisons to indexes have limitations because indexes have volatility and other material characteristics that may differ from a particular hedge fund. For example, a hedge fund may typically hold substantially fewer securities than are contained in an index. Certain information contained herein constitutes “forwardlooking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
© 2025 PT Asset Management, LLC. All Rights Reserved. PT Asset Management, LLC (“PTAM”) is the advisor to the PTAM Funds. Distributed by ALPS Distributors, Inc.
