Bonds Are Back, Ariel's Bobrinskoy Says After Six Down Years

Ariel Investments vice chairman Charlie Bobrinskoy believes bonds are worth buying now, with the 10-year Treasury around 5% and an inflation-adjusted payoff near 2.7%.

Last week's artificial intelligence (AI) selloff arrived alongside a 17-basis-point (0.17 percentage point) one-day decline in that yield, putting bonds in competition with Nasdaq-heavy portfolios for investors skeptical that AI spending will produce gains.

Why Does Bobrinskoy Say Bonds Are Back?

On Tuesday, Bobrinskoy told CNBC that fixed income had logged six years of negative returns because deficits and inflation kept catching investors off guard.

Bloomberg figures nevertheless indicate that the US Aggregate index, a wide measure of investment-grade bonds, delivered 7.30% in 2025 and 1.25% in 2024.

He pointed to a 10-year yield near 5.3% in recent weeks and a real yield — the return after inflation — of about 3%.

The 10-year stood at 4.96% on Oct. 22 and closed at 5.00% on Oct. 23, when the inflation-adjusted yield was 2.66%, according to Fed data.

Demand for credit is also keeping yields high, he said, driven partly by AI financing needs and partly by European governments whose deficit troubles he compared with Washington's.

“…for the first time in two decades, we have decent expected returns in the bond market.”

Bobrinskoy made the comment during his CNBC appearance.

Can Bonds and AI-Heavy Stocks Both Hold Up?

Tuesday brought a second consecutive day of stock gains; the Nasdaq climbed more than 1%, while Boeing kept the Dow just above breakeven, the segment's host said.

Bobrinskoy cautioned that many Nasdaq companies would suffer if roughly $700 billion of data center spending produced poor returns. He recommended that AI exposure be spread across energy, home products, consumer discretionary stocks and bonds.

MAI Capital Management, by contrast, wrote in its Oct. 2 third-quarter review that a bond selloff had raised the 10-year yield to about 5.3% from 4.2%.

What Happens if AI Returns Disappoint?

This week's Big Tech earnings provide the next indication of AI returns, according to Schwab.

So weak numbers could prolong Treasury demand that pulled yields lower last week, while strong results could revive upward pressure from AI-related borrowing.

Deficits and AI borrowing push yields up, while doubts about AI hold them down, leaving bonds caught between the two forces.