Bonds at fair value - perhaps opportunity

We can look at real yields and say that real rates may be high, but there may be a view that real potential GDP is likely to fall and the natural rate of interest is lower.  If we assume growth will be higher, and the natural rate is closer to a longer-term average, we can say real rates have risen sharply, but their current level is not excessive. 

If we think nominal rates may be near fair value, we have to ask what the impact is of a 100 bps increase versus a 100 bps decrease. In that case, the risk-to-reward suggests that bonds may be attractive. If you assume the probabilities are equal, you may want to consider buying bonds.