High Bond Yields: Answers to 5 Top Questions

While bond prices are generally down, the income they provide is up, providing potential opportunities for fixed income investors.

The 10-year Treasury yield briefly touched 5% last month. Rather than celebrating the opportunity to invest in bonds at the highest levels since 2007, we find that many investors are facing this situation with nervousness and trepidation.

Bond prices have fallen sharply over the last two years. (Bond prices and yields move in opposite directions.) The Bloomberg US Aggregate Bond Index is down more than 2% this year and is on pace for its third straight annual loss.1 Last year's 13% loss was the largest on record, which likely caught a lot of investors off guard.

The Bloomberg US Aggregate Bond Index is on pace for its third straight annual loss

For investors who may be nervous, it's important to remember one of the key reasons you hold bonds: the income payments they provide. And while it may seem tempting to wait for yields to rise even further, we never suggest investors try to time the market and wait for the "perfect" time to invest. More importantly, we believe it's likely that interest rates are at or near the peak for this cycle. We continue to suggest investors consider adding some intermediate- and long-term bonds to lock in these high yields with certainty.

Here are some answers to the most common questions we've received: