Is it time to start worrying about rising bond yields?

Bond yields have been all the talk across financial markets in recent weeks, but will they stand in the way of the market rally?

Over recent months, US Treasury yields have been steadily climbing, and after hitting their highest levels in more than a year, markets are starting to become agitated by the move.

Since mid-February, we have seen a marked shift in sentiment towards high-growth stocks. This has been driven by the opportunity cost of what is effectively the risk-free rate of return across the market increasing, and in turn, drawing some investors out of the market.

However, for all the concern around the impact that rising bond yields might have, and what they tell us about future interest rate expectations, we believe the market is getting ahead of itself with its worries.

In fact, for the time being, we still believe this bull market has further potential to play out, with the growing number of stocks on ‘discount’ representing a great opportunity for us to take advantage of the volatility.

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Castlereagh Financial Group Pty Ltd ABN 76 604 407 516 Trading as Kauri Asset Management is a Corporate Authorised Representative (No. 1275519) of AFSL Holdings Australia (AFS License No. 460 940). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs except in circumstances where you have provided your personal financial details via our online application process and received a Statement of Advice from us. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us. © 2020 Kauri Asset Management