Bonds: Extended duration risks aren't as 'attractive' anymore

Bond market traders (^TYX, ^TNX, ^FVX) are making moves ahead of the Federal Reserve's Jackson Hole Economic Symposium this week and anticipated interest rate cuts in September. Schwab Center for Financial Research fixed income strategist Collin Martin joins Catalysts to share his outlook on the bond market and Treasury yields.

Martin believes the Fed could implement at least three rate cuts before the end of 2024, noting that a 50-basis-point cut "wouldn't be needed" in September if that projection holds true. As for market implications, he believes "if those expectations come to fruition, we continue to expect a bull steepening of the yield curve," with less downside for long-term yields, falling short and intermediate-term yields, and heightened reinvestment risks.

However, when it comes to investment strategies, Martin advises investors to "think beyond Treasuries." While he had previously recommended extending duration, he now notes that "the risk isn't as attractive" in the current market dynamic. Instead, he sees opportunities in the investment-grade corporate bond space.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith