New Year Opens Window of Opportunity for Bond Investors

Investors may be able to lock in higher yield levels notes Doug Drabik, Managing Director, Fixed Income Research and Nick Goetze, Managing Director, Fixed Income Solutions.

To read the full article, see the Investment Strategy Quarterly publication linked below.

Key takeaways:

  • Income and cash flow investors are presented with an opportunity to lock in higher yield levels.
  • The inverted yield curve is thought to precede a recession but is also an indicator of lower future rates. In our view, value lies in the intermediate part of the curves.
  • Locking in these rates may give investors strong income benefits to work alongside individual bonds' protective asset qualities.
  • Whether you are an investor seeking total return or just earning income, there appears to be a window of opportunity in fixed income.

Persistent volatility accosted the bond market in 2022, cre­ating prevalent investor uncertainty which could be attributed to various economic circumstances, including: inflation, geopolitical events and recessionary fears. The general trend of interest rates throughout the year moved the 10-year Treasury yield in a range from 1.52% to 4.25%. As you may already know, there is an inverse relationship between bond rates and bond prices. The longer the maturity, the greater the price impact associated with large rate swings.