The last few months have seen some big changes in the bond market. At the end of August, the benchmark 10-year U.S. Treasury yield had risen more than 100 basis points from its May 1.66% low, with corporate, mortgage, and municipal bond yields following suit. This seems to have spooked mutual-fund investors, who yanked approximately $60 billion from bond funds in June, $11.7 billion in July, and $27.2 billion in August. (Source: Morningstar) With bond yields now higher than they’ve been in several years and showing few signs of retreating, the question is: where do we go from here? In our opinion the relative attractiveness of the bond market is currently less attractive than other areas of the market: Nevertheless, it remains an essential part of a well-diversified portfolio, helping to manage income and market volatility and drawdowns, particularly amid flights to more conservative investments. Thus, while we will recommend adjusting client portfolio exposure to favor valuati
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