They’re the highest they’ve been in years but are bonds cheap enough to buy here? Two strategists disagree

The recent surge in bond yields has sparked debate among investors about whether bonds are now cheap enough to buy. At the heart of this discussion is the market's estimate of the average federal funds rate over the next 10 years, which drives bond yields. This estimate, combined with a risk premium for predicting future rates, determines the attractiveness of bonds.

Two strategists have taken differing views on this question. While one might argue that bonds are now attractive given their higher yields, Barclays' assessment is that bonds are at fair value but not yet cheap. This nuanced view suggests that investors should exercise caution and not rush into buying bonds, despite their recent price decline. In the context of the current market, where yields have risen significantly, this assessment implies that investors may need to wait for further market developments before bonds become truly compelling.

Looking ahead, investors will be watching for signs of how the market perceives the future path of interest rates and the economy. Key indicators to monitor include upcoming economic data releases, central bank communications, and shifts in market sentiment. These factors will influence bond yields and, ultimately, determine whether bonds become a more attractive investment opportunity. As the market continues to adjust to changing expectations, investors should stay informed and prepared to reassess their strategies in response to new information.

Originally reported by marketwatch.com. FundNews adds analysis for finance & markets readers.