According to a report from Zhitong Finance APP, Savita Subramanian, Head of US Equity and Quantitative Strategy at Bank of America, said in an interview on Wednesday that the bond market is becoming attractive again and, for the first time in decades, has become a genuine competitor to the stock market. She also warned that investor sentiment has clearly become elevated, while analysts' expectations for US equity earnings growth are at extremely high levels, meaning the stock market is more vulnerable to disappointment than poised for further positive surprises.

Subramanian noted that under BofA's valuation framework, the S&P 500 index may not even achieve a 5% return over the next 10 years. Meanwhile, the current risk-reward on 10-year US Treasury bonds has risen to around 5% or even higher. "When you look at bonds on a risk-adjusted basis, you find that this is the first time in decades that bonds look interesting again," she said.

This assessment aligns with Jim Bianco, President and Macro Strategist at Bianco Research, who has long been bearish on bonds. Bianco previously stated that bonds are finally trading at fair value, that the yield levels currently offered by long-dated bonds are fundamentally appropriate, and that after years of being overvalued they have regained appeal, making now a good time to invest in bonds.

Subramanian said US policymakers are focused on preventing long-term interest rates from rising excessively, with both the Federal Reserve and the Treasury Secretary closely monitoring the long end of the yield curve. She also mentioned that demographic trends may mean the ceiling for interest rates in this cycle is lower than in the 1970s and 1980s, while artificial intelligence (AI) could ultimately bring deflationary pressure. Together, these factors create a potentially more attractive backdrop for bonds. She believes yields are unlikely to rise significantly above the 6% to 7% range; even if they reach those levels, the stock market should be able to withstand them.

Recently, the bond market experienced a fierce selloff as the market repriced expectations that the Federal Reserve would raise rates to curb energy-driven inflation. On Wednesday, the 10-year US Treasury yield briefly rose to 5.368%, the highest level since early 2002, and stood at 5.337% as of press time, while the 30-year US Treasury yield was at 5.719%. In contrast, the stock market has so far shown strong resilience to rising yields. The S&P 500 closed at a record high on Tuesday, its first since August, mainly supported by solid corporate profits and the outlook for AI-related spending.

However, Subramanian believes this optimism itself warrants caution. She pointed out that analysts expect the S&P 500's earnings growth over the next five years to reach the highest level in forty years or even in history. "When expectations are this high, you're more likely to encounter disappointment rather than actual positive surprises." "This is not the tech bubble of 2000, but I do worry that market sentiment has become very bullish," she also said, adding that a natural slowdown in corporate earnings growth is almost inevitable, as a large portion of previous gains came from one-off items at technology companies. At the same time, AI infrastructure bottlenecks could pressure corporate profit margins, while the market has already priced in margin expansion in advance.

She further described the contradictions in current market assumptions: investors appear to be expecting a "frictionless" environment—capital expenditure will rise more than expected, and revenue from AI will also rise more than expected. Everything will go smoothly. Interest rates will remain low. Spreads will remain tight. "But all of this feels a bit difficult," she said.

In terms of year-to-date performance, the 10-year US Treasury yield has risen nearly 27% so far this year, outperforming the benchmark stock index when measured by yield changes. Over the same period, the tech-heavy Invesco QQQ Trust (QQQ.US), which tracks the Nasdaq 100, rose about 22%; the SPDR S&P 500 ETF Trust (SPY.US) and the SPDR Dow Jones Industrial Average ETF Trust (DIA.US) rose about 13% and 7%, respectively. The rise in the 30-year US Treasury yield outperformed the S&P 500 and the Dow, but lagged behind the Nasdaq.