Homrich & Berg says bond yields above 5% lift forward return outlook for fixed income
TLT•Homrich & Berg said starting yields above 5% for most bond tenors improve fixed-income return prospects, with coupon income helping offset price losses if yields rise further.
1. Higher starting yields
Homrich & Berg’s analysis said bond yields rose sharply over the past six months, lifting forward return prospects for fixed income. Starting yields above 5% for most tenors mark the first time since 2007, compared with levels below 1% during the pandemic.
2. Income cushion
The analysis said higher starting yields can cushion the effect of further rate increases. A 100-basis-point yield rise still affects prices similarly for a bond with six-year duration, but more coupon income at a 5% yield offsets losses.
