Bonds Are Struggling in 2026.
Here’s Why Most Investors Should Stay the Course.
Bonds are supposed to be the boring, safe part of your portfolio, so why are they flat or down this year?
On this episode of Coffee with Waymark, our team explains why interest rates are rising, how that shows up in your mortgage, credit cards, kids’ 529 plans, and house hunt. And we’ll share why doing nothing right now is a deliberate choice, not a shrug.
Why Are Bonds Losing Money?
Over the past several decades, declining interest rates often provided a favorable environment for bonds. But when market interest rates rise, the prices of existing fixed-rate bonds generally fall. In 2022, the Bloomberg U.S. Aggregate Bond Index lost approximately 13%, illustrating how significant that impact can be.
Bonds have also experienced challenges in 2026. The same index was down approximately 1% year to date as of October 26, following a particularly difficult third quarter. While this decline is much smaller than the losses experienced in 2022, it highlights why even traditionally conservative investments can fluctuate in value.
Supply and demand also play an important role. U.S. government debt now exceeds $40 trillion, and annual deficits of roughly $2 trillion mean the Treasury must keep issuing more bonds. The U.S. isn’t alone: countries like France and Japan are also borrowing more, and AI companies are raising hundreds of billions of dollars to build data centers. With so much new debt coming to market, buyers can demand higher compensation for lending their money, which puts upward pressure on interest rates.
Inflation expectations, Federal Reserve policy, and economic conditions also influence interest rates. And when rates rise, the effects extend beyond investment portfolios to mortgages, car loans, and credit card debt.
The Family Perspective
Many households with low fixed-rate mortgages have been somewhat insulated from rising borrowing costs. However, variable-rate debt, such as credit cards, and newly issued loans can be much more expensive.
“The low-rate mortgage usually isn’t the debt to lose too much sleep over. It’s the credit card balance where the higher rates cost you the most.” — Brandon Cardarelli, CFP®, Waymark Associate Advisor.
If you’re not sure whether your debts carry fixed or variable rates, now is a good time to check, and to prioritize paying down the highest-interest balances first.
Another area parents may overlook: their children’s 529 college savings plans. Many age-based portfolios gradually increase their bond allocations as children approach college. That means fluctuations in bond prices can affect college savings, particularly for families getting closer to using those funds. Similar shifts toward bonds can occur in target-date retirement funds.
Home Buying Insights
If you’re considering buying a home, it helps to know that mortgage rates tend to move with the 10-year Treasury yield, so when that yield rises, the same house costs more to finance. The 10-year Treasury yield rose from about 4.2% to 5.3% this year, and because many homeowners locked in low rates years ago, fewer homes are coming up for sale.
“Buy the payment, not the price.” — Hanifa Nankinga, MBA, Waymark Client Services Manager.
Start with a monthly payment that fits your budget, including property taxes, insurance, and maintenance, and work backward to determine an affordable home price. Don’t try to time rates, and don’t build your budget around refinancing later. It depends on rates falling, which isn’t guaranteed, and it comes with its own costs.
What Should You Do?
“A bad year in bonds doesn’t mean that your plan has stopped working.” — Brendan Sheehan, MSFP, CFP®, Co-founder of Waymark Wealth Management, LLC.
Don’t have a knee-jerk reaction to short-term bond performance. Sometimes doing nothing is an active, deliberate decision, especially when your investments still align with your long-term financial plan.
The broad bond market’s starting yield of roughly 5.5% is near the highest level in about 15 years, and historically, similar starting yields have been followed by annual returns of around 5–6% over the next five years. Bonds have also earned their keep when stocks struggle: over the last century, bonds made money in 21 of the 25 years when stocks lost money. 2022 was a notable exception, when stocks fell about 18% and bonds lost roughly 13%. And after a 20% decline, a 60/40 stock-and-bond portfolio has historically recovered in about 11 months on average, compared with about two years for an all-stock portfolio. Past results don’t guarantee future returns.
The takeaway isn’t to ignore your investments. It’s to understand why bonds are in your portfolio and whether they continue to support your long-term financial plan.
For more insights and a deeper dive into the bond market, watch the full episode of Coffee with Waymark. Stay informed and make decisions that align with your financial goals.
Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.
The opinions voiced in this recording are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Index performance data from Bloomberg as of October 26, 2026. The Bloomberg U.S. Aggregate Bond Index is unmanaged, and investors cannot invest directly in an index. Past performance is not a guarantee of future results. This content is for informational purposes only and is not individualized investment advice.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
Waymark Wealth Management and LPL Financial are separate entities.
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