Losing my religion: What is the point in bonds?

Reviewing their usefulness at a time of intense volatility

Bond yields plunged to historic lows in August, which left 40% of the total bond market capitalisation trading at negative yields.

What extraordinary times are these? 10-year US Treasury yields peaked 38 years ago at 15.84% and now offer 1.61%. The core inflation rate was 9.5% in 1981, whereas the current core US inflation rate is 2.4%. For investors who have traditionally relied on bonds to provide lower risk defensive diversification, this is a serious concern. At current yields, developed market government bond returns have become less certain, the risk of a negative outcome over the next five to seven years has become higher and their defensive qualities are much more muted than in the past. There is li...