Capital Group : Rising US rates: Untangling the Fed vs. market debate

After a stellar 2020, the US bond market is coming under pressure. Massive government stimulus measures and an improving economic outlook are combining to stoke one of fixed income investors’ biggest fears: higher inflation.

The selloff has been sharp. After rising more than 7% last year, the Bloomberg Barclays U.S. Aggregate Index is down more than 3% on a year-to-date basis. The key questions for investors: Is the selloff warranted, and are rates likely to continue rising significantly from here? Our answer to both is no.

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