Based on historical data from 1926 to 2026, if you had invested in US government bonds 100 years ago and consistently reinvested the interest (compounding), your investment would have grown significantly in nominal terms, although its purchasing power would have been heavily eroded by inflation over the century.
Here is an analysis based on historical returns:
- Long-Term Government Bond Returns: According to data from 1926 to 2024, long-term government bonds provided an average annual return of roughly 5.9%.
- Approximate Growth of $1,000: If you invested $1,000 in a long-term government bond portfolio 100 years ago (1926) and reinvested all interest payments, that initial $1,000 could be worth tens of thousands, potentially exceeding $100,000–$200,000+ in nominal value by 2026, depending on the exact compounding rates and bond types.
- Inflation Impact: While the nominal (dollar) amount would be very high, it is important to note that the real return (purchasing power) of bonds is much lower. Since 1928, long-term government bonds have provided a real return of approximately +1.6% annually, adjusted for inflation.
- Renewal Limitation: In the US Treasury system, savings bonds (such as Series E/EE) only earn interest for a set period, generally up to 30 years. If you did not actively move the matured funds into new bonds every 20-30 years, the money would stop earning interest and become "matured unredeemed debt".
Key Considerations:
- Interest Rate Volatility: Returns varied heavily over the century. Rates were low from 1900 to 1950 (sometimes below 2–3%), reached highs of over 15% in 1981, and then decreased to very low levels in the 2010s.
- Reinvestment: The high value depends entirely on consistently reinvesting the interest payments (compounding). If you took the cash coupons, the final value would only be the principal amount.
