The name is bond — rethinking duration in balanced portfolios

Global bond yields have risen sharply YTD, driven by stronger nominal growth, lingering inflation, fiscal concerns and increased competition for capital from AI. This follows the large bond sell-off in 2022. As a result, the past 5 years have been among the worst periods for bond investors in a century, although yields have only returned to long-run historical averages rather than exceptionally high levels. Are bonds becoming more attractive again for multi-asset portfolios? The optimal bond weight in a balanced portfolio will be conditioned by (1) relative return, (2) relative risk, (3) diversification benefits and (4) the return on cash. Higher yields improve carry and prospective buy-and-hold returns;