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In 2020, the Federal Reserve slashed interest rates near zero, to keep a panicking economy afloat.
And now rates are falling again, as inflation fears give way to labor market fears.
Whats a bond investor to do especially a bond investor with a limited amount to spare?
US Treasury Bonds
As a refresher, bond prices move in the opposite direction of yields.
When bond interest rates fall, the prices of older, higher-yielding bonds rise.
Buyers pay more for higher-yielding bonds because they can no longer score the same yields by buying new bonds.
That pattern is already playing out.
And sure enough, theS&P U.S.
Aggregate Bond Indexhas risen roughly 6% since April.
Economists and investors expect the interest rates to continue falling and bond prices to continue rising.
That makes now a great time to buy virtually risk-free Treasury bonds, at todays relatively high yields.
Some higher-income investors worry that they would pay higher tax rates under a President Harris.
But the higher your tax rate, the greater the benefit of tax-free interest income from munis.
Thats down from around 1.60% a year ago.
They see just 3.75% of high-yield bonds defaulting in the 12 months between June 2024 and June 2025.
Thats compared to a 4.6% default rate for the previous 12-month period.
And like other bonds, prices should keep rising as yields fall.
That makes now a great time to buy bonds in general, while yields remain relatively high.
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