UBS Chief Investment Office analysts are recommending short- and medium-maturity bonds as long-term yields surge across developed markets. The 30-year US Treasury yield has broken above 5.31%, a level not seen since 2007, while Germany’s 30-year Bund has reached 3.75%, its highest since 2011. UBS calculates that 2-year and 5-year US Treasury yields would need to rise by 100 to 230 basis points before price declines would wipe out the income returns on those bonds. The bank is urging investors to prioritize quality and keep duration short, letting the coupon income absorb rate volatility.
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