Will Higher Yields Derail Bond Investing

UBS advises investors to add to quality government bonds, specifically in the short-to-medium maturity segments, following a sell-off that they believe is overdone. They anticipate yields will trend lower as central bank hawkishness is repriced.

Key Takeaways

• 1.Bond yields have declined following the US-Iran deal to reopen the Strait of Hormuz, but remain elevated relative to pre-war levels.
• 2.UBS maintains that bond yields should fall further as market expectations for central bank hawkishness are currently overdone.
• 3.Intermediate-tenor bonds (around 5 years) offer an attractive risk-reward profile for locking in yields.

Table of Contents

• Government bond yields remain elevated despite the latest declines
• We maintain the view that bond yields should fall further
• So, we like locking in yields across multiple scenarios
• New this week
• One liner
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• Investment view

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