Sticky and stubborn inflation could keep yields elevated for some time, but as the Federal Reserve continues to tamp down inflation, fixed income investors can seek a middle ground for Treasury note exposure with the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT).
For the past couple of years, short-term bonds have been the default play in the bond market to curb rate risk. As investor confidence returns to the bond market, some investors are resorting to long-term bonds again, but a median play to consider as the Fed fine-tunes its monetary policy is intermediate bonds.
Right now, yields have been climbing as the economy continues to run hot while at the same time, an abundance of bond supply is available in the Treasury market.
“A recent spike in U.S. bond yields has come alongside muted expectations for inflation, a sign to some bond fund managers that economic resilience and high bond supply are now playing a larger role than second-guessing the Federal Reserve,” a Reuters report said. “Benchmark 10-year nominal yields on Tuesday (August 23) hit near 16-year peaks on concerns about U.S. Federal Reserve Chair Jerome Powell sending a hawkish message about keeping rates high at the annual Jackson Hole symposium on Friday (August 18).”