Historical Bond Price and Total Returns from 10y Yield Series

April 15, 2011

(This article was first published on Timely Portfolio, and kindly contributed to R-bloggers)

Without access to Barclays or Merrill Bond Indicies to the 1970s or Ned Davis to 1950, studying historical bond returns is very difficult.  Here is a way to derive price and total returns on the 10 year US Treasury back to 1962.  I would like to extend to 1871, but monthly yields from Shiller and Fed are averages of the daily yields and not month-end values.  Applying this method to these month averages does not work.

From TimelyPortfolio

R code:


getSymbols(“DGS10″,src=”FRED”) #load US Treasury 10y from Fed Fred

#Fed monthly series of yields is the monthly average of daily yields
#Shiller series also is monthly average
#to calculate returns monthly average does not work
#so we get daily, take monthend with to.monthly
#and unfortunately the series does not go back as far
DGS10pricereturn<-DGS10  #set this up to hold price returns

#I know I need to vectorize this but not qualified enough yet
#Please feel free to comment to show me how to do this
for (i in 1:(NROW(DGS10)-1)) {
    maturityDate= advance(“UnitedStates/GovernmentBond”, Sys.Date(), 10, 3),

#total return will be the price return + yield/12 for one month
colnames(DGS10totalreturn)<-“Total Return”

charts.PerformanceSummary(merge(DGS10pricereturn,DGS10totalreturn),ylog=TRUE,colorset=c(“cadetblue”,”darkolivegreen3″),main=”Simulated Returns from US10y Yield”)
mtext(“Source: Federal Reserve FRED”,side=1,adj=0)

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