Recently, the financial world has closely watched the sharp rise in bond yields, especially the U.S. 10-year Treasury yield reaching 5.24-5.25%, the highest in nearly two decades. This raises questions about the market impact and how investors should adjust their portfolios.
Phun Panichpiboon, a fixed income strategist at Krungthai GLOBAL MARKETS, Krungthai Bank, told Thairath Money that On 29 Sep 2026 GMT+7, the 10-year U.S. Treasury yield rose to 5.24% due to escalating war risks and market expectations that the U.S. Federal Reserve (Fed) will continue raising interest rates, possibly more than previously anticipated.
"The market has somewhat overpriced Fed rate hikes. At this point, long-term bonds have yields that are quite high. Even if yields rise another 0.5% or 1%, holding bonds still offers a favorable risk-reward balance," he said.
Therefore, gradually buying long-term U.S. bonds on dips remains attractive from a risk-reward perspective, assuming bond yields may fluctuate by plus or minus 50 to 100 basis points.
Nattakrit Laothaweesap, Head of Wealth Advisory at TISCO Bank, shared with Thairath Money that The U.S. 10-year bond yield reaching 5.24-5.25% is the highest since 2007 and very high compared to 2022, when the Fed's policy rate was at 5.5% (currently at 3.75-4%).
"Bond yields now reflect expected rate hikes to a significant extent, making fixed income investments more attractive. For example, if dividend stocks abroad yield about 3%, a 10-year bond yield around 5% may offer better value without added risk," Nattakrit explained.
Another key factor driving bond yields is the Fed's policy rate outlook. Nattakrit expects the market has mostly priced in rate hikes, forecasting one more hike in Q4 2026 and possibly two more in 2027.
Phun said the Fed's rate hikes will depend on economic data and official statements. He expects one more hike at the December 2026 meeting, followed by a hold until mid-2027, then gradual rate cuts.
However, there remains a risk of faster rate hikes if inflation stays high. For example, if the war escalates causing energy infrastructure attacks and crude oil prices spike above $120-130 per barrel, the Fed might accelerate hikes by 0.5% increments, a risk to monitor.
At this time, bonds offer good diversification. Nattakrit recommends gradually accumulating medium- to long-term global bonds, especially high-quality investment grade.
"Analysts expect the Fed to hike once more this year or next, which is largely priced in. With interest rates now high, this is a good opportunity to lock in yields around 5% or more," he said.
For higher risk tolerance, private sector bond funds may yield up to 7%. If investors accept possible currency volatility, unhedged foreign bond investments are also appealing. Holding 5-10% of a portfolio in gold is advised to diversify risk, with gradual accumulation preferred.
There are three main bond investment methods: 1) direct bond purchases, focusing on investment grade; 2) mutual funds, allowing selection of bond types and countries; and 3) ETFs, offering various options including government bond groups.
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