Swordfish Trading: It’s Time for Bonds

Markets continue to trend higher. That includes stocks, but also gold. Rising asset prices leave markets a bit extended right now. That suggests a possible pullback ahead of the election.

For now, investors may want to look for assets that haven’t gotten overbought yet. That’s a tough opportunity to find right now, with so many assets near their highs. However, conditions appear ripe for, of all things, bonds.

Why? For starters, bond prices are structured to rise as yields fall. The Federal Reserve has started to lower interest rates. Just as raising rates in 2022 and 2023 led to falling bond prices, the opposite should occur now.

With the 10-year U.S. Treasury yield still near 4%, today’s buyers can get a reasonable rate. It’s also one of the highest rates over the past 15 years. As yields decline, the price of the bond should rally to adjust the yield lower.

Corporate bonds offer higher yields. And they should also rally with interest rates trending lower. But unlike government bonds, corporate bonds carry some company-specific risks to them. That’s why they tend to have higher yields to begin with.

For those in a high tax bracket or high tax state, municipal bonds could be valuable for their tax advantages now as well.

To get the details on why now may be time to lock in bond yields, click here.