By Tiffany Wilding, Mike Cudzil
The spike in bond yields presents an opportunity for fixed income investors to earn capital gains and diversify portfolios.
Summary
- The recent spike in bond yields presents an opportunity for fixed income investors to add longer-duration assets with high starting yields and potential for capital gains, while also diversifying their portfolios.
- The rise in bond bond yields is driven chiefly by markets’ perception of a reduced risk of recession, which, counterintuitively, could lead to a jump in the supply of government bonds in the future.
- The spike in rates also tightens financial conditions, making new debt more expensive and eventually slowing economic activity, which may lead to central banks easing.
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