Rising U.S. Treasury Yields and Fixed Income Allocation

Key Points

• Rising U.S. Treasury yields prompt reconsideration of fixed income allocation strategies.
• Market watchers suggest including global emerging markets debt in portfolios for diversification.
• Concerns over U.S. credit downgrade and fiscal spending plans contribute to the reevaluation.
• Investors may look to emerging markets government bonds for potential benefits.
• Historically low interest rates have led to a surge in U.S. government borrowing costs.

Pros

• Investors can diversify fixed income portfolios with global emerging markets debt for potentially higher yields.
• Some market experts suggest reevaluating the status of U.S. government bonds as a safe investment.
• Increased focus on emerging markets government bonds as strong options for diversification.

Cons

• Mounting concerns over U.S. credit downgrade and fiscal spending plans impacting U.S. Treasury yields.
• Uncertainty surrounding how high U.S. Treasury yields could rise in the future.
• Revising historically-held notion of U.S. Treasurys as risk-free investments.

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