Is It Time For Bonds To Recover?

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Let’s dive into today’s note. Our assessment is as follows:

  • The Fed’s monetary tightening remains blunted by compositional changes in the economy, with nominal growth well above the current debt service burdens.
  • Recessionary pressures remain contained, with income, spending, sales, and employment expanding.
  • Relative to these conditions, treasury markets expect the Fed to cut interest rates once over the next eighteen months, suggesting little mispricing.
  • Systematically quantifying this picture allows us to understand whether future bond returns are likely better than in recent history. Today, monetary policy is unlikely to ease, suggesting weak returns for bond investors.

Read the full note below:

The Observatory – Is It Time For Bonds To Recover (2.12.2025)

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