Yields are the highest they’ve been in years — but are bonds cheap enough to buy? Two strategists disagree.

The recent surge in bond yields has sparked debate among investors about whether bonds have become attractive enough to buy. At the heart of the matter is the market's estimate of the average federal funds rate over the next 10 years, which drives yields. This rate is a key determinant of bond yields, as it influences the expected income investors can earn from holding bonds.

Two strategists have taken differing views on the matter. While one may see bonds as cheap enough to buy, Barclays takes a more cautious stance, finding bonds at fair value but not yet cheap. This assessment suggests that while yields may be high by historical standards, they may not yet offer sufficient compensation for the risks associated with investing in bonds. This nuanced view is likely to resonate with fund managers who are evaluating the relative attractiveness of bonds in their investment portfolios.

Looking ahead, investors will be watching for signs of how the market's expectations for interest rates and inflation evolve. As the economic landscape shifts, yields may adjust, potentially making bonds more or less attractive. Fund managers will need to stay alert to these developments, assessing whether bonds become a more compelling addition to their portfolios. The ongoing debate about bond valuations serves as a reminder of the importance of careful analysis and ongoing monitoring in the fixed income market.

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