One more on bonds for the WE

One more on bonds before the weekend — a rare sequence for me as an equity investor. To follow up on the bond charts shared in the Daily this week, today’s graph looks at the sensitivity of different U.S. fixed-income segments to changes in interest rates. The message is increasingly interesting. At current yields, bonds have rebuilt a meaningful income cushion and the risk/reward profile has changed considerably compared with the last few years. Take the 10-year U.S. Treasury: with rates unchanged, the expected one-year return is around 5.3%. A 1% rise in rates would result in a loss of roughly 2.5%, while a 1% decline could generate a return of around 13.1%. That asymmetry is what deserves attention. After years when fixed income offered very little yield and plenty of duration risk, bonds are becoming a genuine alternative again for multi-asset investors. It is really time to look at the asset class again.