Strategists at Goldman Sachs Group have advised investors to maintain a cautious approach to bonds, even as recent selling pressure has pushed yields upward and improved their attractiveness within diversified investment portfolios.

The team, led by strategist Christian Mueller-Glissmann, noted that the past five years rank among the worst periods for bond performance in a century, yet the sharp rise in yields is now enhancing their investment appeal. Global average government bond yields have climbed this week to their highest point in 19 years.

"We believe a case can be made for strategic bond allocations to return to more 'normal' levels, but from a tactical standpoint, deciding whether to increase holdings of long-duration bonds right now remains a complex question," the strategists wrote.

The recent bond selloff has already attracted some major investors back into the market. Bob Michele at JPMorgan Asset Management said on Wednesday that his team has begun purchasing long-dated bonds across the US, Japan, and Australia, citing prices that have become "simply too cheap."

Goldman Sachs acknowledged that elevated yields now offer a buffer against further upward moves and may, over a longer horizon, support a gradual shift in optimal bond allocations back toward historical norms. In the near term, however, the firm stressed that energy-related shocks and interest rate expectations remain the dominant factors likely to shape the performance of both equities and fixed income.

This suggests that raising bond exposure could introduce additional portfolio volatility rather than serve as a defensive stabilizer. Goldman Sachs has kept its allocation stance for the coming 12 months unchanged, with an overweight position in equities, a neutral stance on bonds, and an underweight recommendation for credit assets.

Mueller-Glissmann and his colleagues concluded: "We view bonds as increasingly becoming tools for income generation, while their role as a risk hedge has weakened, resembling the conditions observed over the roughly one hundred years leading up to the late 1990s."