Bonds on a Roll: What's Driving the 2025 Boom?

The US bond market is having a great time in 2025. Prices are up, and yields are down. This is mostly because people think the economy is slowing down. When growth slows, bonds become more attractive. It's like when everyone wants to buy the same toy, and the price goes up. The Federal Reserve is expected to cut interest rates. This usually happens when the economy isn't doing so well. Lower rates mean bonds pay less, but they also mean existing bonds become more valuable. So, investors are buying bonds now, hoping to cash in on these cuts. Bond yields are near their lowest point of the year. The 10-year Treasury yield, for example, is around 4. 02%. That's way down from the 4. 79% peak in January. Different types of bonds are doing well. Long-term corporate bonds are up over 10%, and investment-grade bonds have gained about 7. 4%. But there are risks. Tariffs, political uncertainty, and a government shutdown could cause problems. Plus, the government shutdown is delaying important economic reports. This makes it harder for investors to make decisions. The Fed meeting this week is a big deal. Investors want to know if the good times will keep rolling. But with the government shutdown, there's less data to go on. This makes it tricky for the Fed to send clear signals. If the bond market keeps doing well, it's likely because the economy is weaker than people think. Inflation is also expected to drop, which would push the Fed to cut rates further. Some experts predict two more rate cuts by the end of the year. This could keep the bond market on a winning streak.