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First and foremost, you should know fact from fiction when it comes to the bond market, and three primary myths are explored here:
📌 Myth 1 – Safe bonds are risk-free: Longer-term bonds are not riskless, as their prices can be volatile when interest rates change. Even shorter-term bonds, like three-month Treasury bills, are not entirely risk-free, especially for those managing long-term liabilities.
📌 Myth 2 – Federal Reserve policy determines long-term interest rates: Factors like supply and demand for bonds, high debt levels, term premiums and inflation risk play a more significant role in long-term rates.
📌 Myth 3 – An aging population means lower bond yields: Recent research indicates that this relationship is not straightforward. Aging populations may lead to increased debt issuance by governments, potentially causing higher interest rates.
You don’t have a crystal ball to relay what will happen to the bond market in the coming months – and neither do we. Amidst the uncertainty, a diversified portfolio and comprehensive investment strategy are vital for financial peace of mind.