Inflation could push bonds above 5% this year, strategist says
Fidelity Investments Director of Global Macro Jurrien Timmer joins Market Domination Overtime to analyze the persistent rise in bond yields (^TNX, ^TYX, ^FVX). "Clearly, we're in a regime, and we have been since 2022 when the whole rate spectrum reset," Timmer tells Yahoo Finance. He explains that when yields rise to a level where they "compete with equities" (^DJI, ^IXIC, ^GSPC), the dynamic shifts significantly: "Stocks have to compete with what we consider to be the risk-free asset, and when those yields go up, the stock market needs to compete because investors expect a premium from stocks because they are generally more volatile." The era of suppressed risk premiums may be ending, as Timmer notes that the current risk premium environment "has been suppressed for many years." But these conditions are now shifting and allowing yields to climb. Looking ahead, he projects bond yields could be "poking through 5%" in 2025. However, Timmer cautions that "the inflation genie was never quite put back in the bottle after the COVID spike in inflation." He warns that if economic reacceleration occurs before inflation is fully contained, inflation could rise again and "prevent the Fed [Federal Reserve] from cutting rates further." To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here. This post was written by Angel Smith
