The 10-year Treasury yield remains around 5.29%, its highest level since 2002. According to UBS analysis, this yield would need to rise by approximately 65 basis points for capital losses to offset the income earned. For 2-year and 5-year bonds, the necessary increases would be 225 and 110 basis points respectively. The Federal Reserve raised rates in September and the market anticipates another rate hike in December with 67% probability. UBS and Schwab recommend income-focused investors favor short-maturity bonds to reduce duration risk, while Martin from Schwab also sees attractive opportunities in investment-grade corporate bonds.
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