“Capitalizing on 5% – The Silver Lining in Rising Yields”

The US 10-Year Treasury yield reaching the 5% threshold has dominated financial headlines this week, yet for

disciplined investors, this milestone offers one of the most compelling income environments in over a decade. Rather

than viewing elevated yields solely as a market headwind, this can also be seen as a return to healthy capital pricing.

Higher benchmark yields provide investors with an opportunity to lock in substantial, reliable income without taking on

excessive credit risk which in particular can benefit multi-asset portfolios.

Beyond the immediate income benefits within fixed income, a 5% baseline instills healthy discipline across the equity

landscape. Elevated borrowing costs filter out over-leveraged market participants and shift investor focus towards

high-quality, cash-generative businesses with strong balance sheets and pricing power. This market environment

anchors valuation multiples and favors solid business fundamentals over speculation, creating an ideal setting for

active management. Ultimately, a 5% yield can be seen as a more normalised level following the quantitative easing

and ultra-low rates in recent years.

With shorter dated treasuries also offering healthy yields of above 4.6% for the US 2-Year, multi-asset strategies can

build relatively defensive and income generating components of the portfolio with minimal duration risk that can offer

returns higher than inflation. Given the current inflationary pressures from the higher oil price and relatively small

premium between 10-Year and 2-Year treasuries, multi-asset strategies favouring the shorter dated bonds look more

appealing in the months ahead.

“Bond Yields Moving Higher”