Bonds Are Having a Bang-Up Year

Bonds did not do their job last year, but that was then, and this is now. Jeffrey R. Kosnett on why the picture is brightening for fixed-income investors.

Blue Sky with clouds and Sunlight Beam behind the Clouds, The Brighter Future is Coming
(Image credit: Getty)

The picture is fast brightening for fixed-income investors for the rest of 2023. Federal Reserve chairman Jerome Powell hinted (in his coy manner) in early May that the bank is finally done tightening credit and raising interest rates — good news for bond prices, which move in the opposite direction. Also, the stock, real estate and energy markets seem resigned to a broad economic slowdown. That implies a flight to safety. 

Last month I suggested applying a “barbell” strategy to your savings or bond-fund assets, which means concentrating on short and long maturities while skipping the middle. With short-term rates up after the Fed’s May 3 announcement and long-term Treasury and investment-grade corporate bond prices on the march, as longer-term rates fall, I am extremely confident in my earlier prognostication that fixed-income devotees will recover half or more of last year’s losses by the close of 2023.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.