Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to Investing Insights. I'm your host, Sarah Hanson, and I'm filling in for Ivana Hampton today.

The November election triggered a steep sell-off in longer-term bonds, with yields on the 10-year

Treasury note climbing as high as 4.45 percent. Fixed income markets have since stabilized,

but yields remain significantly higher than their September lows. We have Morningstar Investment

Management's chief multi-asset strategist Dominic Papalardo to help us unpack what's going on

and what might be ahead in 2025. Here's our conversation. All right. So welcome Dom. Thanks so much for

being here. Thanks, sir. Good to be here with you. Great. So can you tell us first, maybe let's start with the

news. Why did bond yields rise so much in the wake of the election last month?

Sure, Sarah. There are two main issues investors were worried about. The first was potential for inflation to resurface, both from a supply side perspective and demand side perspective.

The supply side would be from potential tariffs that Trump has talked about.

Tariffs by definition raise prices, which could lead to inflation. The second demand side is from

decreased tax rates, both for wage earners as well as business owners, which will impact the demand

side, certainly. Both of those could potentially push

yields higher. The second factor is more structural, which is potentially higher borrowing rates

for the U.S. government, as they have to issue more debt to fund those tax rates that I mentioned.

At some point, bond investors will demand more yield or more

compensation for risk if the government has to continue to issue more and more debt.

They're still very unlikely to default, but at some point, investors will want more compensation

as debt levels continue to increase. Right. So it sounds like investors have a certain state of mind when bond yields are

rising. What does that thinking look like and what does it tell you or tell us about what they expect

in the future? Yeah, the higher bond yields really focus around the lingering concerns of inflation,

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