Morningstar Urges Bond Investors to Favor 4.8% Yields Over Timing Bets
Updated
Updated · Morningstar · Sep 3
Morningstar Urges Bond Investors to Favor 4.8% Yields Over Timing Bets
3 articles · Updated · Morningstar · Sep 3
Summary
10-year Treasury yields near 4.8% give bond investors more cushion against price declines than in 2022, when yields around 1.5% left little protection during the rout.
Half a percentage point was the rough Sept. 1 drop for total bond market index funds even as bond-market headlines flared, underscoring that bond volatility remains far lower than stocks.
Morningstar says investors should treat bonds as capital-preservation tools, using cash for near-term spending, short- and intermediate-term high-quality bond funds for 3-to-10-year needs, and individual Treasuries or TIPS for known liabilities.
13% losses for intermediate-term bond funds and nearly 30% for long Treasuries in 2022 were described as extreme outliers, not a reason to load up on long-duration or lower-quality bonds now.
3.0% was the typical taxable bond fund's 10-year return through 2025, but the typical investor earned 2.1%, reinforcing the advice to avoid tactical shifts between cash, short bonds and long bonds.