Things are looking up for bond markets. As yields rise, the potential for income is the highest in more than two decades, and volatility tied to interest rate increases may decline as the Federal Reserve nears the end of its rate-hiking campaign. Through it all, the U.S. economy has surprised to the upside.
In an ideal world, achieving high income against this backdrop would be as easy as parking cash in relatively low risk money market funds and hoping it grows. The reality is more nuanced: Rates are likely to fall from here, so it’s unrealistic to expect returns from cash and cash-like investments to stay at current levels long term.