Chart of the Week: Forever Young

Higher yields have restored the income potential of bonds and broadened their usefulness in diversified portfolios.

• In 1624, a Dutch water authority issued a perpetual bond to finance dyke repairs, and the bond is still paying interest more than 400 years later.
• Bonds continue to finance infrastructure, industry and other investments, including the data centres, semiconductors and power infrastructure required for artificial intelligence.
• Technology companies are increasingly using bond markets to fund AI investment, prompting investors to question the scale of spending, its returns and the effect of additional borrowing on technology businesses.
• The author views recent technology-share volatility as a reassessment rather than a rejection of the AI theme because major hyperscalers remain profitable, diversified and financially strong.
• More than 80% of the global fixed-income market now yields above 4%, although higher yields reflect greater borrowing costs and do not eliminate investment risk.

Takeaway: Higher starting yields can provide more income, a larger cushion against volatility and more portfolio-construction options, but investors should remain selective and attentive to credit and duration risks.