Making sense of market moves
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Amid the headlines that Zendaya and Tom Holland are engaged, you may have missed the most exciting news of all today: The yield on 30-Year US Treasuries reached its highest level in over a year.
Look, we know how it goes—when we say fixed income, you immediately keep scrolling to see how many more referrals you need for a free tote bag. But while bonds might not be the most glamorous asset class, yields pack a punch these days.
The bond breakdown
The 30-year Treasury rate jumped to 4.85% this morning, its highest point since November 2023. At the same time, the 10-year yield leaped 50-basis points to reach 4.64%, its highest since December. Why?
Part of the equation is simple supply and demand. Investors are anticipating a major government debt issuance this week, including $119 billion of Treasury bonds. With more US debt being issued, bond prices get pushed lower, which results in rising yields.
More broadly, fear that sticky inflation will mean fewer rate cuts in 2025 has also put pressure on the bond market and kept yields high since the election. Worries that Donald Trump’s massive tariff plan will increase domestic inflation have only exacerbated fears of fewer rate cuts, as has the president-elect’s proposals to eliminate the debt ceiling.
What does this mean for you?
Keep in mind that if yields climb too high, they could hurt stocks. But if you’re looking for some fixed income, today’s yields look mighty juicy.
One way to play it is the iShares Core US Aggregate Bond Index ETF (AGG). The 30-day yield on AGG hit 4.56% as of Jan. 3, far higher than the 12-month trailing yield of 3.74%, meaning that your monthly dividend is higher if you own bonds or bond ETFs.
What the pros have to say: “In fixed income, we continue to believe that high grade and investment grade bonds, diversified fixed income, and equity income strategies are valuable in a portfolio context,” explained UBS’s Solita Marcelli in a note today. “Overall, while positioning for lower rates may no longer be as urgent, putting cash to work and seeking durable income should remain a strategic priority for investors.”—LB