George Bory of Allspring Global Investments said investors can safely buy duration because the Federal Reserve is expected to remain on hold [1].
This outlook is significant for portfolio management as the risk associated with longer-duration bonds typically fluctuates based on the central bank's movement of interest rates. When rates are expected to stay flat, the volatility of these assets generally decreases, allowing investors to lock in yields with more confidence.
Speaking on the Halftime Report on CNBC Television, Bory said the current environment favors adding duration to portfolios [1]. The strategy involves increasing the sensitivity of a portfolio to interest rate changes by holding bonds with longer maturity dates.
Bory said the Federal Reserve's decision to keep interest rates unchanged makes these longer-term assets less risky [2]. This stability provides a window for investors to shift their allocations without the immediate fear of sudden rate hikes that would typically drive bond prices down.
The recommendation comes as market participants continue to monitor the central bank's trajectory. Bory's assessment suggests that the period of rate volatility has plateaued enough to justify a shift in bond strategy [1].
“Investors can buy duration safely because the Federal Reserve will remain on hold”
This shift in strategy suggests a transition from a defensive posture to one of yield preservation. By adding duration while the Federal Reserve maintains a hold, investors attempt to secure fixed returns before any potential future rate cuts occur, which would typically increase the value of existing long-term bonds.
