Yielding lemonade from lemons

You’ve probably heard rumblings about a global bond selloff—but if you’ve been too busy throwing your money at GoPro because you’re a Markiplier fan, now’s the time to tune in.

Rising geopolitical tensions between the US and Iran have reignited fears that inflation could again become a runaway train, triggering investors everywhere to dump bonds as they anticipate higher interest rates (keep in mind, bond prices and yields move inversely).

The 10-Year US Treasury yield touched 4.8% today, its highest level since January 2025. Meanwhile, the two-year Treasury yield jumped to 4.369%, also its highest since early 2025.

But yields weren’t just bouncing in the US: Japan’s 10-year yield hit 3%, the highest in decades, while long-dated German and French bonds also hit their highest levels in roughly 15 years.

Heads up: Given that oil prices briefly surged above $92 per barrel once again, and the Strait of Hormuz is still not fully open, analysts are expecting yields to stay volatile. UBS, for one, predicts that 30-year and 10-year Treasury yields will end the year at 5% and 4.5%, respectively, while yields on shorter-dated government bonds should decline over the next few months.

Fixed income gets some fixing up

Skyrocketing yields are ominous news for the global economy, the stock market, and the Federal Reserve. But there is a silver lining for investors: Bonds suddenly deliver far more bang for their buck.

That’s why some strategists are seeing higher yields as an opportunity, rather than a disaster. “For almost a decade, investors became accustomed to a world where interest rates were low and high-quality bonds yielded almost nothing,” explained MacKenzie Kohler, an associate portfolio manager of fixed income at Northwestern Mutual. “Today, that environment has changed. Interest rates are considerably higher, but more importantly, real rates—the return investors can potentially earn after accounting for inflation—are positive.”

Now, investors can earn 4% to 5% on relatively risk-free US Treasuries, without the volatility of stocks. “We continue to see an attractive risk-return profile in the short- to intermediate-maturity segment of high-quality government and corporate bonds,” explained UBS Global Head of Equities Ulrike Hoffmann-Burchardi. “Yields are likely to decline over the coming months, while their currently elevated levels provide a cushion against volatility and serve as an important driver of returns.”

Just remember: No bond is going to experience the exponential profits of AI stocks, or even outpace the S&P 500 in a good year. But for a low-risk investment, they’re pretty high-reward right now.—LB