What’s up with Treasurys, the deficit and the dollar?
Volatility has been rattling the bond markets — and weakening the value of the dollar. Watch this video for ways investors can consider responding.
A SERIES OF POLICY SURPRISES — from tariffs to budget proposals that could push the Federal deficit to troubling new levels — have triggered heightened market volatility. Yields in the Treasury markets have become more volatile as overseas investors rebalance away from U.S. assets, and the dollar is down 7.5% over the year.1 How can investors navigate these dramatic market shifts and minimize risks without losing sight of potential investment opportunities?
In the video above, Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, and Matthew Diczok, head of Fixed Income Strategy for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank, take a deep dive into the forces reshaping the fixed-income markets and suggest strategies that can help you navigate periodic volatility through the second half of the year, while positioning yourself for a potential recovery. “When you don't see wonderful opportunities, just pull the horns in a little bit and don't take a lot of risks,” says Diczok. “Taking advantage of longer-term, higher yields is probably the most important approach right now.”
For latest insights on the markets, tune in regularly to the CIO's Market Update audiocast series.
1 Morningstar, “More than tariffs: Behind the U.S. dollar’s decline,” May 19, 2025.
Important disclosures
The opinions expressed are as of 5/29/2025 and are subject to change.
Investing involves risk, including the possible loss of principal.
Past performance is no guarantee of future results.
Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice-versa. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. The risk that exchange rate fluctuations will reduce the value of returns arises when investments denominated in foreign currencies are purchased.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC and wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
