From Low Ranger to High Plains Drifter

Investors could be pardoned if they have whiplash, but the fact is that interest rates go through paradigm shifts. Indeed, they just migrated from a decade of ultra-low levels back to what may be a sustained period back "home" in their long-term 3-5% range.

Just as investors never caught up with the 40-year secular decline in rates, the inverted curve could be with us for some time, leaving a boon for yield-curve strategies. Furthermore, with the vast majority of rate hikes behind us, market volatility is set to fall. A re-emergence of the "search for yield" is likely to follow, providing a tail wind for spread product and further boosting returns.

These newly restored higher yields should fuel a continuation of the bull market that began in Q4 2022, one driven not by a rapid drop in yields, but simply driven by yield itself. After all, in bonds, yield is nearly destiny.

Learn more in this episode of All the Credit®, featuring Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds, and hosted by Tom Porcelli, Chief U.S. Economist, and Mike Collins, CFA, Senior Portfolio Manager, Multi-Sector Strategies.

Recorded on September 20, 2023.