Ariel Investments vice chairman Charlie Bobrinskoy says now is a good time to buy bonds, with the 10-year Treasury yielding about 5% and an inflation-adjusted return near 2.7%.
An artificial intelligence (AI) selloff last week coincided with a 17 basis point (0.17 percentage point) one-day drop in that yield, leaving bonds competing with Nasdaq-heavy portfolios for investors who doubt AI spending will pay off.
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Why Does Bobrinskoy Say Bonds Are Back？
Bobrinskoy told CNBC on Tuesday that bonds posted negative returns for six years because deficits and inflation kept surprising investors.
However, Bloomberg data show its US Aggregate index, a broad gauge of investment-grade bonds, gained 7.30% in 2025 and 1.25% in 2024.
He cited a 10-year yield near 5.3% in recent weeks, a real yield (the return after inflation) of about 3%.
Fed data show the 10-year fell to 4.96% on Oct. 22 and closed at 5.00% on Oct. 23, when its inflation-adjusted yield was 2.66%.
Meanwhile, demand for credit keeps yields elevated, he said, driven partly by AI funding needs and partly by European governments with deficit problems he likened to Washingtons.
“…for the first time in two decades, we have decent expected returns in the bond market.”
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Bobrinskoy said on CNBC.
Can Bonds and AI-Heavy Stocks Both Hold Up？
Stocks rose for a second day Tuesday, with the Nasdaq up more than 1% while Boeing left the Dow barely positive, according to the segments host.
Bobrinskoy warned that a weak return on roughly $700 billion of data center spending would hurt many Nasdaq companies. He urged diversifying AI exposure into energy, home products, consumer discretionary stocks and bonds.
In contrast, MAI Capital Managements third-quarter review, published Oct. 2, described a bond selloff that lifted the 10-year yield to about 5.3% from 4.2%.
What Happens if AI Returns Disappoint？
Big Tech earnings this week offer the next read on AI returns, according to Schwab.
Therefore, weak results could extend the demand for Treasuries that pulled yields lower last week, while strong ones could revive pressure from AI-related borrowing.
Deficits and AI borrowing lift yields while AI doubts hold them down, leaving bonds caught between both forces.