Bond Yields Are Finally Looking Attractive. What to Buy Now
It has been an annus horribilis across Fixed-income marketsas Bondshave taken a historic selloff in 2022. Bond yields are also looking plump enough to be attractive again.
Bond prices and yields move in opposite directions, and prices have plummeted dramatically, pushing up yields.The yield on the 10-year US Treasury bond, a proxy for borrowing costs, briefly moved above 4% on Wednesday for the first time in 12 years.
The good news
The good news is that the Federal Reserve's interest-rate hike cycle should end in the next six months, bringing peace back for bond prices and yields.
Fed officials expect the federal funds rate to reach 4.6% in 2023, up from a target of 4.4% at the end of 2022. From there, the fed-funds rate is expected to plateau and then decline modestly in 2024. The fed-funds rate is now about 3.25%, implying only a few more hikes in the next six months.
What's next
A smoother ride for bonds is far from assured: Fed officials have repeatedly raised their rate forecasts in the face of stubbornly high inflation.
However, the big moves down are probably behind us. Yields, especially at the short end of the curve, should be high enough to absorb a few more rate hikes and still leave investors with a positive total return. Investors can get exposure in treasury with ETFs tracking specific length.
Analysts opinion
"Cash rates north of 4% are a really attractive starting point for fixed income," says Erin Browne, a managing director at Pimco who focuses on multi-asset strategies. "It's making it attractive to look at high-quality fixed income."
"What you want to own in a growth slowdown are long bonds," says Stealey, noting that the bonds could rally if a recession settles in, prompting the Fed to cut rates again.
Source: barron's
Disclaimer: Past performance can't guarantee future results. Investing involves risk and the potential to lose principal. This article is for information and illustrative purposes only.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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72823542 : hell na lmao
71707650 :
arthurcurryd20 : what an interesting article to come out right after the bond market in the UK crashed...hmmm
70981655 : 4gzi
101731590 : not recommend buying US bonds, looking at how big their debt is and whether they are able to pay such debt. instead, china government bond is more promising
LK Chan : Are dividends tax deductible?
71287337 : China crash incoming.....
moomoolol88 :
Revelation 6 : Bonds are for the closer to retirement.
Revelation 6 71287337 : I don’t think China is crashing, maybe not the best of times, but they will recover. Everyone will do better once America heals herself. And yes America is the problem and she’s big enough to cause the problem. See Biden’s “Common Poverty Plan.” You will own nothing and like it!