Inflation Could Keep Rates Higher for Longer

• April CPI and PPI data are expected to come in hot, primarily due to rising oil and energy prices.
• Longer-term yields are likely to stay elevated, with a potential for a modest drift higher, supported by inflation and a resilient labor market.
• The Federal Reserve is expected to remain on hold for the rest of the year, as policy decisions are committee-driven, making it a 'tall task' to influence a shift towards rate cuts.
• For fixed income investors, a benchmark duration of around six years and a ladder strategy are suggested, with preferreds offering opportunities for riskier portfolios.

Cooper Howard, Director of Fixed Income Research & Strategy at Schwab, discusses expectations for upcoming inflation data (CPI, PPI) and its implications for bond yields and Federal Reserve policy. He anticipates elevated inflation and a Fed on hold for the remainder of the year, suggesting longer-term yields will likely remain buoyed. He also offers fixed income strategies for investors.