Bond Bulls Charge Ahead, Challenging Consensus on Rising Yields

Robert Tipp doesn’t buy the popular Wall Street view that U.S. government bond yields are bound to keep rising this year, though he allows that they could before likely falling later.
The chief investment strategist at PGIM Fixed Income, Mr. Tipp is among a relatively small group of contrarians who have bet for months that the forces lifting bond yields—expectations for a post pandemic surge in growth and inflation, increased government borrowing—are no match for the structural factors that have suppressed them for decades.
Mr. Tipp’s position is notable because he and other so-called bond bulls have generally been right about the direction of Treasury yields over the past 30 years. That gives their perspective some added ballast as investors confront a set of highly unusual circumstances, including the possible end of a pandemic and an unprecedented surge in peacetime government spending and tax cuts.
The yield on the benchmark 10-year U.S. Treasury note, a key driver of interest rates across the economy, topped 1.7% earlier this month for the first time since the start of the coronavirus pandemic, settling Friday at 1.658%. That was up from 0.913% at the end of last year but down from around 5% 15 years ago and 8% 30 years ago.
Yields, which move in the opposite direction of bond prices, tend to rise when investors expect faster growth and inflation—which can lead to higher short-term interest rates set by the Federal Reserve—and fall when they anticipate a weaker economy.

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