🧲 Bond pull

Bond Yields Are Near 5%. Why Investors Are Buying the Selloff

Bonds are finally paying investors to stomach the pain. The 10-year Treasury yield recently topped 5.2%, hammering existing bondholders while giving new buyers some of the richest income in years. That tradeoff has some of the world’s biggest money managers calling this the best fixed-income opportunity in decades.

Cushion included: Investors don’t have to reach very far out on the yield curve to get paid anymore. Two-year Treasurys are yielding over 4.9% (opens in a new tab), barely below the 10-year, without taking on as much long-term risk from deficits, oil shocks, and shifting Fed policy. The high coupon helps cushion further price declines, while the short maturity means investors get their principal back sooner if rates keep climbing.

• If two-year yields rose another percentage point over a year, the hefty coupon would cushion most of the price hit, leaving investors with a roughly 4% total return.
• The same one-point move would hurt longer-dated bonds much more, leaving 10-year Treasurys down roughly 2% and 30-year bonds down about 8%.

Why The Pros Are Buying What Retail Fears

Bond selloffs scare investors in a way stock dips never do. The iShares Core US Aggregate Bond ETFAGG sits down 4.8% in price this year. Bank of America strategist Savita Subramanian argues bonds today are more attractive (opens in a new tab) than the S&P 500 at any point in 20+ years, with her valuation work implying -3% annualized index returns for the next decade.

• UBS strategist Matthew Misch says higher rates (opens in a new tab) should widen the gap between strong and weak borrowers, favoring BB-rated debt and utilities over CCCs and tech.
• That gap is already widening, with high-grade corporate debt offering ~6% yields vs. the S&P 500’s sub-1.4% dividend yield.

The contrarian's case: Ray Dalio points to the more than $1T the US spends annually servicing its debt and recommends avoiding (opens in a new tab) rate-sensitive assets altogether. Pimco’s Dan Ivascyn lands somewhere in the middle, expecting slower growth without a recession and seeing room for patient investors to earn 6%–7% from a high-quality portfolio. The risks haven’t disappeared, but investors are finally being paid enough to stick around.

Car Dealers Face a Model Drought as Redesigns Fall to 9%

Showrooms are starting to feel like reruns. Automakers are expected to redesign 9% of their lineup (opens in a new tab) on average across the 2026-2028 model years, far below the 20-year average of 14%, per analyst John Murphy. The drought comes as US auto sales are already down roughly 2% this year, and the pipeline would look even thinner without GM’s pickup redesign.

• Carmakers canceled or delayed dozens of EV models, booking more than $70B in charges and impairments.
• Ford and GM have ceded share to Toyota, Honda, and Hyundai, which offer more hybrids and cheaper models.

Stalled out: Most fresh metal won’t arrive until 2028 and beyond, leaving what Murphy calls “a total stall for new products” just as the industry’s economics shift again. Washington has cut its 2031 fuel economy target to 34.9 mpg (opens in a new tab) from 50.4 mpg, while Bain & Company sees US sales falling by 2M (opens in a new tab) vehicles by 2040. So despite carmakers having more freedom over what to build, they have less room to get it wrong.