04.14.23

People Are Investing in Bonds Again—Once They Figure Them Out

by: Joe Pinsker

After years of low returns, bonds enticing investors again, many of whom are unaware of their nuances. Over the course of 2022, a two-year Treasury note went from yielding less than 1% annually to more than 4%. Last September was the first time since 2007 when more than 85% of fixed-income assets paid out more than 4%, according to BlackRock. Sales of Treasury bills, which mature in a year or less, totaled $16.6 billion in March on the government site TreasuryDirect, up from $2.4 billion a year earlier. U.S. households and nonprofits’ collective bondholdings rose to $4.52 trillion in the fourth quarter from $3.14 trillion a year earlier, according to the Federal Reserve. Although bonds are often framed as a dependable, there are risks, says Caleb Tucker, the director of portfolio strategy at Merit Financial Advisors. “Investors can get caught off guard by, a year from now, the [rate] environment’s changed, their cash needs have changed, and all of a sudden they do actually have to sell that bond before maturity,” possibly at a loss, Tucker said.

Read the full article on Wall Street Journal