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The yield on the 10-year Treasury note has increased by a factor of eight in six years, a shift that is making fixed-income assets an attractive alternative to equities in an era of sticky inflation.
This development raises a critical question for investors: is the current bond market a safe haven for income, or a trap for those who misjudge where interest rates are headed?
The answer depends on how one balances the appeal of guaranteed face value against the risk of price depreciation if yields continue to climb. Historical context frames the current environment.
From September 1981, when 10-year notes yielded 16%, until the summer of 2020, when yields dropped below 1%, bond rates were in a long-term decline. Since the post-pandemic period, that trend has reversed.
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