Government Bonds

Whether the Bank of England halts all purchases in August or merely begins to slow the pace of purchasing later in Q4 this year, by 2022, less technical support will exist for gilts.

We believe UK government bonds are ultimately most vulnerable to a rise in inflation, and the 10-year Gilt currently trading at 0.73% does not come close to compensating for this.

In TwentyFour's Multi-Sector Bond update on Thursday 13th May 2021, Partner & Portfolio Manager Eoin Walsh provided an update on investment themes and positioning in the fixed income market.

With treasury yields moving aggressively higher this year, anyone reading or listening to the financial press will have become very accustomed to headlines highlighting the negative performance of “Bonds”.

The biggest mover so far this year in fixed income markets has been US Treasuries. The curve has bear steepened, with the short end remaining unchanged while longer maturities have sold off by anything between 10bp at the five-year point of the curve and just over 20bp in the 30-year.

The gradual backup in yields since the onset of the pandemic has given Treasuries a little more potency to protect bond portfolios, though we don’t see the rise being anywhere near big enough for them to behave like they used to.

Unlike the past six months, where nearly all new deals performed well in the secondary market, from here on in that is far from guaranteed. Expect winners and losers.

George Curtis discusses Q3 performance for credit markets and provides his outlook for the rest of the year.

Overall, in our view there may be some temporary volatility ahead which investors can try to sidestep or even take advantage of, but it’s probably not worth trying to be too cute as our medium term outlook is still constructive.

Given most countries are going through the same issues and their fiscal expansions are justified, the relative value has not changed that much.

Partner and Portfolio Manager Eoin Walsh discusses Q2 performance for the Strategic Income strategy and provides his outlook for 2020.

Given the steep, uninterrupted rally we have witnessed since the end of March, we think it is a good time to reassess how much value is left in fixed income markets, if any.