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Stocks Are Losing the Race With Bonds in Era of Tightening Fed

  • Bond selloff has yields looking attractive relative to stocks
  • Junk debt is more appealing with corporate defaults low: Nixon
Traders On Floor Of NYSE As Stocks, Futures Climb
Photographer: Michael Nagle/Bloomberg

Bonds have been whispering in the ears of stock investors all year. Now they’re starting to shout.

Soaring inflation and tightening monetary policy boosted rates on 10-year Treasuries to 3.5% last week, the highest since 2011. While comparing bonds with ever-volatile stocks is tricky, various measures show the allure of fixed income growing. Stocks generate about 5.3% of their price in earnings, on average, making the gap between the two asset classes’ “yield” close to the slimmest since 2018.