Did you hear? Bonds could be set to offer “equity-like” returns in 2024.

I’m serious. There’s no sarcasm there. It’s not a guarantee (there are precious few of those in life), but following the most pronounced selloff in… well, in history depending on what, exactly, you mean by “bonds,” the asymmetry on offer is very favorable. Long story short, you’d do quite well in a pronounced rally, but your losses would be relatively small in an extension of the selloff.

That’s one reason (although it’s not the main reason) why I turned demonstrably and avowedly bullish duration a few weeks ago, an inclination which looked quite smart for all of 72 hours this week. And yet, as long-end bond ETFs were poised for their best weekly performance since March, I repeatedly cautioned that it might be a false dawn — that this probably isn’t the bond rally you’re looking for. Sure enough, the bear roared back on Thursday.

On Friday, yields reversed sharply lower again amid highly disconcerting headlines out of the Mideast, where Israel instructed 1.1 million Gazans to evacuate south, a demand the UN described as completely infeasible and extremely dangerous.

I don’t think the geopolitical safe-haven bid is the best path to a bond rally. For duration to catch a sustainable bid you really need the US economy to falter. But one way or another, bond yields seem more likely to correct lower versus trek higher in the near- to medium-term, notwithstanding ongoing concerns around Treasury oversupply, deficits and fiscal profligacy.

In the latest installment of his popular weekly “Flow Show” series, BofA’s Michael Hartnett walked through the math for a “Bonds in 2024” trade. The world, Hartnett wrote, is “camped in cash,” and the “level of yields is creating an opportunity for equity-like returns from bonds.”

The table above shows you the potential for two bond portfolios, one “benchmark” and one “high-risk.”

The yield on the “benchmark” portfolio — a blended 20% equal-weight book with 20% T-bills, 30-year Treasurys, IG, high yield and EM bonds is 6.8%. It’s 9.3% for the “high-risk” blend, which is 25% 30-year Treasurys, IG BBBs, CCCs & EM HY.

The expected 12-month returns in the event yields drop 100bps next year are 13% for the benchmark portfolio and 17% for the higher-risk portfolio, against losses of just 0.2% for the benchmark and 1.3% for high-risk in the event yields rise 100bps, Hartnett calculated.

That’s the “favorable asymmetry” I mentioned here at the outset.