The outlook for the bond market is bleak. With the benchmark 10-year Treasury yielding a paltry 2.36%, it’s simply not worth the risk to own it. Should its yield rise just one percentage point, the price would fall about 9%.
With central banks around the world beginning to nudge interest rates higher, and inflation starting to return to normal levels, bond yields, in my view, will rise from here—not dramatically in 2018, but enough so that you should keep your maturities relatively short. What’s more, because short-term rates have been on the upswing while longer-term rates have barely budged, the extra yield you get for buying a long-maturity bond has diminished markedly.
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