With yields above 5%, is it safe to buy bonds again?

investmentnews.com:

Embattled debt investors like the look of 5% Treasury yields as they weigh the risk-versus-reward scales for the world’s biggest bond market.

The rise in yields to levels last seen before the financial crisis reflects a run of solid data, with the US economy growing last quarter at the fastest pace since 2021. And a rising tide of Treasury debt issuance, meanwhile, has prompted the return of a positive risk premium for owning longer-dated bonds.

For all the pain in the bond market — and some traders are betting there’s more to come — the notes look a lot more attractive to long-term buyers once Treasury yields are running at 5%-or-higher.

Those levels nudge them closer to the Federal Reserve’s current policy-rate ceiling of 5.5%, allowing buyers to lock in elevated income before officials eventually embark on any easing cycle. 

“The arithmetic starts to move in your favor after having been out of your favor for a very long time,” said Stephen Bartolini, a fixed-income portfolio manager at T. Rowe Price. “It takes a lot larger increase now to wipe out total return over a 12-month horizon because you’re getting yield.”

Buyers emerged Thursday, spurring a drop of some 10 basis points across the Treasury curve as another round of disappointing earnings caused equities to slide. The 10-year yield was little changed at 4.85% on Friday in Asia, about 16 basis points below the 16-year high touched on Monday.

Investors are in need of a silver lining as they nurse wounds from the worst selloff seen for Treasuries in more than four decades. The Bloomberg US Treasury Index has dropped since a string of regional bank failures fanned expectations of a credit crunch and recession in early April. The yield on 10-year notes, meantime,