We all know it by heart: Past performance is no guarantee of future results. Yet we constantly examine past performance to gain a bit of insight into the future - at least in terms of how certain phenomena are related. Consider what insight a look at the past can provide about investing in bonds going forward.

Of course, the performance of bonds is related to movement in interest rates. We have detailed information about how interest rate movement and bond returns have related to each other since 1948. Over the past 65 years, interest rates had a general rise and then a decline. From 1948 through 1981, the federal discount rate increased - not every year but as a general trend. In 1948, the federal discount rate was 1.34%, and by 1981 it reached 13.42%.

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