Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under management or other measures. MSCI has established an information barrier between equity index research and certain Information. None of the Information in and of itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. Neither MSCI ESG Research nor any Information Party makes any representations or express or implied warranties (which are expressly disclaimed), nor shall they incur liability for any errors or omissions in the Information, or for any damages related thereto.
For funds with an investment objective that include the integration of ESG criteria, there may be corporate actions or other situations that may cause the fund or index to passively hold securities that may not comply with ESG criteria. The screening applied by the fund’s index provider may include revenue thresholds set by the index provider. The information displayed on this website may not include all of the screens that apply to the relevant index or the relevant fund. These screens are described in more detail in the fund’s prospectus, other fund documents, and the relevant index methodology document.
Our weekly newsletter delivers the latest insights on economic forces shaping markets—from Goldman Sachs leaders, economists, and investors around the world. We invest the power of Goldman Sachs’ financial and intellectual capital to advance enduring economic growth and opportunity. Diversification and asset allocation do not ensure a profit or guarantee against loss. Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. The second half of the year may continue to present a complicated picture for bond investors.
If it keeps climbing past 22%, the government is holding down long rates by financing itself with ever shorter maturities. The same number signals the rollover risk taken to manage the new strategy. When the fiscal authority absorbs duration to push long-term rates down, it eases financial conditions that the Fed may be trying to keep tight, and it does so through a channel the Fed does not control. In other words, Treasury has begun conducting open market operations, the buying and selling of securities to influence financial conditions, which is the central bank’s traditional tool. Brusuelas notes that Warsh has long argued for market-determined rates free of official direction. Eight days before the new chair’s Jackson Hole debut, the fiscal authority demonstrated that it has a long-term rate tool of its own.
For most portfolios, a modest allocation (5–15%) provides diversification without excessive exposure to volatility. Our experience has taught us to remain humble, to respect the power of market forces, and to keep a long-term perspective. From our perspective, current yield levels look increasingly appealing by historical standards, offering a compelling entry point for long-term investors. We continue to view bonds as attractive and would look to add if yields continue to rise, given the opportunity higher yields present for income, carry, and rolling down a steeper yield curve.
The past performance of each benchmark index is not a guide to future performance. Watching yields grind higher can be a difficult process, but higher yields may ultimately benefit investors through greater potential income generation. In 2022, starting yield levels were too low to offset price declines as rates moved higher at a rapid clip. Today, attractive inflation-adjusted starting yields may provide ample income to offset price declines related to recent market moves, and broader bond market performance remains resilient. Yields for 30-year long-dated US Treasurys reached historic highs this month amid a massive selloff, climbing to roughly 5.3%, the highest level since 2007. In July, long government funds raked in almost $6 billion, their largest monthly inflows since May 2025, according to Morningstar data.
But still, “investors aren’t well compensated to own corporate securities right now,” she says. Ware is particularly cautious about long-term corporate bonds, where she says the risk-reward tradeoff is least favorable. In the world of fixed-income investments, long bonds—often synonymous with the U.S.
The increase in interest rates is also undermining the valuations of “defensive” and “quality” parts of the equity market, which are most sensitive to interest rates and were largely valued as proxies for bonds. The market moves have caused the correlation between equities and bond yields to turn negative—stocks have climbed as bonds have declined in price. Rising bond yields have also compressed equity risk premiums, meaning investors are being paid less to take on the additional risk of owning stocks instead of risk-free assets like government bonds. Currently, the extra yield, or “spread,” investors earn on average by buying a corporate bond—instead of a Treasury of the same maturity—is quite modest. That means investors receive relatively little compensation in exchange for taking on credit and default risk. Ware and team aren’t overly worried about these risks in the current economic environment—they feel that the corporate backdrop appears strong and aren’t forecasting an uptick in defaults.
Even as the long bond grabs headlines, the 10-year yield has held within the 3.75%–4.75% range that has served as our reference point for several years. Rising sovereign debt loads, a surge in AI-related corporate bond issuance, and lingering inflation anxiety tied to energy costs – and what that means for central bank policy – all play a role. The types of bonds to invest in, and whether to buy them at all, depend on the individual investor, their risk profile and time horizon, Bianco said. But other fixed-income products can be a good alternative to Treasurys, she added. Oppenheimer points to some other reasons stock investors should be cautious.
Investment Policy
The AI investment boom is also fueling a borrowing spree among hyperscalers, adding to competition for funds at the long end of the bond market as they ramp up spending on data centers and other infrastructure. Mortgage bond reinvestment could be the Federal Reserve’s most effective and immediate tool to unlock the housing market – without even touching interest rates. The relative underperformance of the long bond has steepened yield curves and increased the term premium, the extra yield investors demand to hold longer-dated securities. Barring an unexpected economic downturn, we expect this higher term premium to endure. Fidelity is not recommending or endorsing this investment by making it available to its customers. “Treasurys are very attractive,” says Ware, particularly after the recent rise in yields.
Treasury expects to borrow $739 billion in privately held marketable debt this quarter. When a buyback operation retires $4 billion of 30-year bonds, that borrowing need grows by $4 billion, and with coupon auction sizes frozen, the marginal instrument is the bill. The buyback removes a 30-year bond from the market and, at the margin, a short-term bill takes its place. The Treasury Department announced Aug. 20 that it will at least double the size of its “liquidity support” buybacks of long-dated government bonds. The maximum size of each operation rises from $2 billion to at least $4 billion, while the purchases target securities with 10 to 30 years left to maturity.
- In this PIMCO Perspectives, we explore the dispersion playing out across monetary policy and financial markets.
- Energy-market disruptions in the Middle East ignited an inflationary impulse.
- There are numerous other factors related to the markets in general or the implementation of any specific investment strategy, which cannot be fully accounted for the in the preparation of simulated results and all of which can adversely affect actual results.
- With only minor interest rate sensitivity, they can help protect against share price declines while quickly pricing in higher interest rates.
- In July, long government funds raked in almost $6 billion, their largest monthly inflows since May 2025, according to Morningstar data.
In the U.S., the deficit has become largely inelastic to underlying economic need, rising sharply even in a strong economy. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. The sharp increase in capital spending is benefiting not just chipmakers and technology hardware companies but also traditional industrial and energy businesses involved in building physical infrastructure. “The old pattern of US, technology, and growth outperformance has given way to a more eclectic mix of returns across geographies, sectors, and factors,” Oppenheimer writes. “If oil disruptions continue into the second half of this year and inflation expectations rise further, there is a real risk of a speed bump for equity markets,” Oppenheimer writes. The main reason equities are making new highs is because of robust earnings growth, writes https://d-addicts.com/wingtalks-communication-platform-review/ Peter Oppenheimer, chief global equity strategist and head of Macro Research in Europe, in a report.
But long-term Treasury yields respond more to macroeconomic conditions, including inflation expectations and future growth. Sustainability Characteristics provide investors with specific non-traditional metrics. Alongside other metrics and information, these enable investors to evaluate funds on certain environmental, social and governance characteristics. Sustainability Characteristics do not provide an indication of current or future performance nor do they represent the potential risk and reward profile of a fund. Sustainability Characteristics should not be considered solely or in isolation, but instead are one type of information that investors may wish to consider when assessing a fund.
The futures market is now pricing in a 65% chance of a hike at the September meeting and an 85% chance of at least one hike by the end of the year. For more on the U.S. debt and bond markets, I’ve got Stacey Vanek Smith on the line with me. She’s a reporter at Bloomberg Businessweek and co-host of the podcast “Everybody’s Business.” Good morning, Stacey.
What’s Pushing Long-term Bond Yields Higher?
In general, the values shown for “market value,” “weight,” and “notional value” (the “calculated values”) are based on a price provided by a third-party pricing vendor and do not reflect the impact of fair valuation, if applicable (the “vendor price”). Unlike an actual performance record, simulated results do not represent actual performance and are generally prepared with the benefit of hindsight. There are frequently differences between simulated performance results and the actual results subsequently achieved by any particular fund. In addition, since trades have not actually been executed, simulated results cannot account for the impact of certain market risks such as lack of liquidity.
Because these companies have high credit ratings, their bonds have generally offered only small yield premiums over Treasurys. For that reason, Ware and team have approached such deals with caution—especially as the heavy spending required for the AI buildout could increase these companies’ borrowing needs and eventually raise questions about those high credit ratings. After all, a bond can’t rise in price indefinitely the way a stock can if an AI issuer is successful. Since 2008 the Fed has paid interest on the reserves banks hold with it, and since QE it has kept the banking system saturated with them. A reserve balance that earns a rate near what a Treasury bill pays is, from a bank’s point of view, just another overnight government asset. When the Fed buys a bill by creating reserves, it swaps one short-term interest-bearing government liability for another, and banks feel little pressure to lend the new reserves into circulation, so the effect on the money supply is subdued.
The yield on the 30-year US Treasury has moved above 5%, reaching its highest level since 2007. Yields of similar maturity bonds in Germany, Japan, and other major markets now range between 3.5% and 6%. Bank reserves are roughly unchanged once the dust settles, because the reserves Treasury pays out to the bond seller are pulled back in when the bill buyer pays Treasury. If money market funds buy the bills with cash they had parked overnight at the Fed, reserves can drift somewhat, but either way no new deposits are created for anyone to spend. What changes is the maturity of the debt, which is why the operation resembles the Fed’s 1961 and 2011 “twist” programs more than it resembles QE, a comparison drawn within hours of the announcement. Aug 28 (Reuters) – Rising long-term bond yields may reflect investor expectations of an AI-driven productivity boom, rather than just concerns over inflation and swelling government debt, according to Jacob Manoukian, JPMorgan Private Bank’s U.S. head of investment strategy.
