Jefferies has warned that persistent upward pressure on US Treasury yields points to a structural bear market in government bonds, a development that could create headwinds for equity markets and reinforce the case for holding gold.
In a note published on Friday, the investment bank said the yield environment is likely to remain challenging, particularly for bond-sensitive assets such as real estate investment trusts (REITs). While higher yields have already weighed on Singapore-listed REITs, Jefferies sees selective buying opportunities in that sector.
What a structural bear market in bonds means
A structural bear market in US bonds implies a prolonged period of rising yields and falling prices. For investors, higher yields make fixed-income securities more attractive relative to equities, potentially drawing capital away from stock markets.
The effect is not uniform. Sectors that rely on cheap debt or have bond-like characteristics — such as REITs, utilities and certain infrastructure plays — tend to be the most vulnerable. Jefferies highlighted REITs as one area where the pressure is already visible.
Gold favoured as a hedge
Jefferies remains constructive on gold and gold-mining stocks, recommending them as a hedge against potential debasement of the US dollar. The brokerage sees the current bond-market dynamics as supportive for precious metals, since a weakening dollar and loose fiscal policy tend to boost gold prices over time.
Gold is priced in US dollars per troy ounce and trades on the over-the-counter spot market. When the dollar declines, gold often becomes cheaper for buyers using other currencies, supporting demand.
Jefferies’ view adds to a growing chorus of analysts who argue that gold's role as a store of value becomes more important when real yields on government debt are low or negative.
Selective approach to REITs
Despite the headwinds, Jefferies does not dismiss REITs entirely. The bank said it sees selective opportunities in the Singapore REIT market, where some valuations have adjusted enough to offer reasonable risk-reward. It did not specify which names it favours.
For investors following the gold price, the implication is that a sustained bond sell-off could keep gold in the spotlight. You can track the live gold price on GoldRate.info to see how these macro trends play out in real time.
Key takeaways
- Jefferies warns of a structural bear market in US bonds, with persistent yield pressure expected.
- Higher Treasury yields could be challenging for equity markets, especially REITs and other bond-proxy sectors.
- The brokerage remains constructive on gold and gold miners as a hedge against US dollar debasement.
- Selective opportunities exist in Singapore REITs despite sector-wide headwinds.
Common questions
What is a structural bear market in bonds?
A structural bear market in bonds refers to a prolonged period during which bond prices fall and yields rise, driven by sustained factors such as inflation, tight monetary policy or fiscal expansion. It is considered structural rather than cyclical when the trend is expected to persist for years.
Why does a bear market in bonds support gold?
Rising bond yields often reflect expectations of higher inflation or a weaker currency — both factors that can boost gold's appeal as a store of value. When real yields (yields minus inflation) remain low, holding gold becomes relatively more attractive because it offers a non-yielding alternative that retains purchasing power.
Which assets are most at risk from rising Treasury yields?
Assets that are sensitive to interest rates and borrowing costs, such as REITs, utilities and companies with high debt loads, tend to be most affected. Higher yields also reduce the present value of future cash flows, which can weigh on growth stocks.
What does Jefferies recommend for equity investors?
Jefferies advises caution on REITs generally but sees selective opportunities in the Singapore market. It recommends gold and gold-mining stocks as portfolio hedges against potential dollar debasement.
The outlook from Jefferies underscores a shift in sentiment among institutional investors, who increasingly view gold not just as a safe haven but as a strategic holding in an environment where bond markets are under persistent pressure.