In Finding a Bottom in Bonds, Ryan Kimmel, an analyst on DoubleLine’s Macro Asset Allocation team, provides insight on U.S. interest rates and fixed income markets.
With interest rates on the 10-year U.S. Treasury yield climbing over 100 basis points since June to their highest level in 15 years, many investors are wondering: When will we see a bottom in bond prices?
Ryan sees the recent advance in interest rates as mainly technically driven, with the market struggling to absorb an excess supply of Treasuries. While this dynamic might continue to put upward pressure on yields in the near term, the fundamental backdrop for bonds might become more supportive over the coming quarters, with an elevated risk of an economic slowdown and continued deceleration of underlying inflation.
With yields on the Bloomberg US Aggregate Bond Index near multidecade highs, the risk-reward profile for fixed income looks attractive and asymmetric. Ryan highlights opportunities in Agency mortgage-backed securities and collateralized loan obligations, which are offering enticing carry with minimal credit risk.