Investors have been drawn to buying bonds in recent times due to high and attractive yields. Despite some concerns about the potential impact of rising tariffs and inflation, many are opting for fixed-income investments as a way to hedge their portfolios.
Recently, 10-year U.S. Treasury bond yields surpassed 4.6%, with some reaching nearly 5% in 2025. This level is not seen since before the Great Recession in 2007.
Investors can secure around 5% annually for high-quality corporate bonds, while those in higher tax brackets can earn even better returns from municipal bonds. In Minnesota, where state and federal taxes are relatively high, a seven-year bond with a yield of 4% is an attractive option.
As financial professionals, we often discuss the trade-offs between stocks and bonds. Historically, stocks have provided higher returns than bonds, but in today’s interest rate environment, bonds can be more attractive. Even so, it’s likely that stocks will outperform bonds over the next decade, but with lower volatility. High-quality bonds offer a stable source of income at 5-7% annual rates.
The outlook on inflation and Federal Reserve policy also impacts bond attractiveness. Lower inflation levels make bonds more appealing, while consensus expects the Fed to resume rate cuts soon. If interest rates decrease, investors can lock in better yields by buying bonds before the rate cuts happen.
Source: https://www.startribune.com/invest-us-treasuries-10-year-bond-yield-less-risk-economic-uncertainty-stock-market/601345767