Portfolio Manager
Fixed Income Strategist
05/19/2026
Head of Fixed Income Tom Tzitzouris and Portfolio Manager Jerry Hendricks are back this week with an update into the fixed income markets. With treasury yields back up above 4.6%, they discuss potential consequences, causes and implications this has on nearly every asset class.
Definitions:
Cost of Capital - The cost of capital is the required rate of return a company must earn on its investments to satisfy its lenders and equity investors.
Duration - Duration measures a bond’s sensitivity to changes in interest rates by estimating the weighted average time to receive its cash flows.
Convexity - Convexity measures the curvature of a bond’s price-yield relationship, indicating how duration changes as interest rates move.
Mortgage-Backed Securities (MBS) - Mortgage-backed securities are bonds backed by pools of mortgages, where investors receive cash flows from homeowners’ principal and interest payments.
Synthetically Long Treasury Yield -Being synthetically long Treasury yields means having a position that benefits when Treasury yields rise (and bond prices fall), typically via derivatives or positioning.
Treasury Market / 10-Year Treasury Yield - The Treasury market is the market for U.S. government debt securities, with the 10-year Treasury yield serving as a key benchmark for interest rates and economic expectations.
Drag - Drag refers to any factor that reduces portfolio returns, such as rising interest rates, negative carry, or costs that weigh on performance.
Prepayment Option - The prepayment option is the borrower’s right to repay a loan early, affecting the timing and amount of cash flows to investors.
This communication was prepared by Strategas (“we,” “us,” or “our”), a brand that offers investment advisory services through Strategas Asset Management, LLC, an SEC Registered Investment Adviser, and provides research to institutional investors through Strategas Securities, LLC, a broker-dealer and FINRA member firm and an SEC Registered Investment Adviser. Information regarding market or economic trends, or the factors influencing historical or future performance, reflects the opinions of management as of the date of this communication, and are subject to change. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. Fixed income is generally considered to be a more conservative investment than stocks, but bonds and other fixed income investments still carry a variety of risks such as interest rate risk, credit risk, inflation risk, and liquidity risk. In a rising interest rate environment, the value of fixed- income securities generally decline and conversely, in a falling interest rate environment, the value of fixed-income securities generally increases. All investments carry some level of risk, including loss of principal.
Strategas Asset Management, LLC and Strategas Securities, LLC are affiliated with Robert W. Baird & Co. Incorporated ("Baird"), a broker-dealer and FINRA member firm, and an SEC Registered Investment Adviser, although the firms conduct separate and distinct businesses.
Yields rising? More Pain to Come for Risk Assets - Bond Market Update
May 19 2026