The Federal Reserve’s aggressive interest-rate increases brought bond investors a silver lining: significantly higher yields. With the central bank now focused on cutting rates and bond market yields already off their peak, have investors missed the boat?
“The short answer is: definitely not,” says Mike Cudzil, a fixed-income portfolio manager at Pimco. “Yields are still attractive.”
What’s key for investors to remember is that “lower” is all relative. Bond market strategists and fund managers generally agree that yields are still attractive, especially relative to inflation, and will likely stay higher than before the pandemic.
As a result, there are plenty of opportunities in the fixed-income sector, as long as inflation continues on its downward (if occasionally bumpy) path. Additionally, the bond allocation in investors’ portfolios could offer price appreciation as rates fall in the months ahead.
