Why Bonds have lost money....

Over the last decade to May 2026, Australian bonds returned −1.26% per year after inflation. Global bonds: −1.44% per year after inflation.

A "lost decade" for the part of the portfolio meant to be safe. The problem isn't bonds. It's 'duration'.  Fixed-rate bonds lock in a coupon, so when rates rise, prices fall. Floating rate investments reset their income with short-term rates, stripping out that interest-rate risk while paying more. The numbers are stark. 

A floating rate* bond portfolio vs. a traditional** or passive fixed income portfolio, tested across the last 8.5 years and five supply shocks (Covid, Ukraine, tariffs, Iran):

Source: weekly total-return data October 2017 to May 2026 Underlying indices: Australian FI - Bloomberg AusBond Composite 0+ Yr (BACM0); Australian FRNs - Bloomberg AusBond Credit FRN 0+ Yr (BAFRN0); Global FI - Bloomberg Global Aggregate Total Return, AUD-hedged (LEGATRAH); Australian private credit proxy - MCP Master Income Trust (ASX: MXT) NAV return; Cash - Bloomberg AusBond Bank Bill Index. Past performance is not a reliable indicator of future returns. Floating Rate FI = 20% Cash, 40% Australian Private Credit Proxy, 40% Australian FRNs. *Duration FI = 20% Cash, 40% Australian Fixed Income, 40% Global Fixed Income.Floating rate fixed income has doubled the annual return, with a fraction of the risk. The macro backdrop favours floating, not fixed.

1. Global public debt has risen to 95% of GDP which means relentless bond supply for years to come.

2. Sticky inflation and supply shocks keep pushing yields up.

3. Central banks look set to keep interest rates structurally higher.

We haven't invested client funds into Bond funds for many years. The above is part of the answer why.