Looking ahead with longer duration in bonds

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[ "Edward Al-Hussainy" ]
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Edward Al-Hussainy, Senior Currency and Rates Analyst, Head of Emerging Market Fixed Income Research

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Investors are watching for the end of rate hikes. Now may be a good time to revisit the income and total return potential of longer duration bonds.

 

  • Historically, bond underperformance reverses around the end of a hiking cycle. The gains are significantly more meaningful for longer duration bonds. Because the market response generally happens very quickly, it’s difficult for investors to time this transition.

 

  • There are already signs that the economy and financial markets are starting to weaken, which means the end of the Fed’s hiking cycle is coming into view. Rather than trying to time the market, fixed-income investors should consider how longer duration bonds can support their income needs now — and their total return goals going forward.

 

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