|Kathy Jones – Chief Fixed Income Strategist
What’s the Bigger Risk: Bond Market Bubble or Complacency?
Summary: Bond yields are starting to move up from historical lows, but chances are slim that interest rates will spike. Slow growth, low inflation, and strong investor demand are likely to limit increases in yields. Jones’ biggest concern is that the markets are not anticipating the potential for tighter monetary policy or higher inflation. Complacency in regards to rate hikes has led to high valuations in riskier parts of bond markets. Jones recommends reducing portfolio average duration or using bond ladders to spread out maturities and mitigate risk.