Treasury yields have increased, with the benchmark 10-year yield hovering around 5.29%, following a weaker-than-expected jobs report for September. This rise comes after the Federal Reserve's recent rate hike in September, with a 67% probability of another increase in December, according to the CME FedWatch tool.
UBS's Ulrike Hoffmann-Burchardi notes that current yields provide a cushion against potential price declines, stating that the 10-year yield would need to rise by approximately 65 basis points for capital losses to negate the income earned. For shorter maturities, the two-year and five-year yields would need to increase by 225 and 110 basis points, respectively.
Both Hoffmann-Burchardi and Collin Martin from Schwab highlight the attractiveness of current yields, suggesting that income-oriented investors should consider short-maturity bonds to reduce duration risk. Martin emphasizes the quality of high-yield bonds, indicating that they present a relatively high-quality investment opportunity despite market volatility.
Overall, while there are concerns about rising yields, the current income potential remains appealing for investors