The yield on the benchmark 10-year Treasury bond has climbed above 2.3%, up from 1.7% in January. David Wright, portfolio manager for the Sierra Core Retirement fund, however, does not see the rise as sustainable. ‘A sustained rise in interest rates can only take place when you have inflation well above 2% for more than a few data points, GDP above 2% for more than a couple of quarters and household income steadily rising,’ says Wright. ‘We are not seeing any of those things right now so we think a sustained rise in rates is years away.’ As a result of his skeptical view of the economy, Wright has his heaviest positions in municipal bonds, saying there is untapped value there as well as safety. Since his mutual fund is comprised of other mutual funds, he says he is relying on his respective fund managers to steer clear of landmines like Puerto Rico and Illinois municipal bonds.
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