The Relationship Between Starting Yields and Forward Returns in Bonds

If starting yields for long duration bonds of a 30 year treasury are 5%, there is a 93% chance that your returns over the next 30 years will be around 5% each year. Although there will be volatility in the price, a 10-year treasury yielding 5% guarantees a 5% return after 10 years. This close relationship between starting yields and forward returns suggests that the 60-40 investment strategy has never been more sensible. If you buy the Barclays aggregate bond index with a starting yield of 4.5%, there's a high likelihood of earning around 4.5% per year over the next 10 years.