Advisors to the ultra-wealthy steer clients back to bonds

Key Points:

• The recent sharp selloff in bonds has created a rare opportunity for high-net-worth investors to secure stock-market-like returns with lower risk by investing in tax-exempt municipal bonds or harvesting tax losses to reinvest in higher-yielding debt.
• Treasury yields have surged to their highest levels in over two decades, with the 10-year Treasury yield reaching 5.365%, providing attractive entry points for bond investors despite some reluctance due to recent market volatility and historically low rates.
• Experts recommend diversified exposure across the bond maturity curve, emphasizing the value and tax efficiency of municipal bonds, which currently offer yields comparable to stock market returns but with less risk.
• High credit quality, such as AA-rated municipal bonds, is essential, and investment strategies should align with clients' financial goals and liquidity needs to avoid forced selling and preserve wealth through market fluctuations.
• While advisors are cautious about aggressively pushing bond purchases, they suggest that investors holding cash consider entering the bond market now to capitalize on compelling yields and portfolio income opportunities.