Treasury yields have shot higher since the Federal Reserve’s 50 basis point jumbo interest-rate cut in September, as traders have scaled back expectations for how aggressively the central bank will move to lower borrowing costs in the future.
When yields rise, bond prices fall. But UBS Group still believes long-dated bonds like 10-year and 30-year Treasurys look attractive, given that the Fed is expected to gradually lower interest rates..
“We continue to recommend investors shift excess cash into quality fixed income as the rate-cutting cycle advances and erodes cash returns. In addition to IG bonds, which we rate as Attractive, investors can also consider diversified fixed income strategies—including selective exposure to higher-yielding parts of the asset class—as a way of further enhancing portfolio income,” said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, in emailed commentary.
The yield on the 10-year Treasury note jumped more than 10 basis points on Monday, sending a shudder through the U.S. stock market. But the pace of the increase has eased as of Tuesday, with the yield on the benchmark note only modestly higher in recent trade. It stood at 4.194% in recent trade.