Are bonds back (rather than cash)?

michaels

I know some on here have held cash rather than bonds as part of their diversified portfolio of late in the belief that equities and bonds were not likely to be negatively correlated at the recent valuations.

However bonds are now well down from their historic highs, is it time to move back into bonds from cash?

Linton

It depends very much on what happens to interest rates.  Although they are high compared with the previous 12 years or so they are still lower than what was normal in the previous 40 years:  If interest rates rise the capital value of bonds will fall further.




What do you think?

michaels

Linton said:

It depends very much on what happens to interest rates.  Although they are high compared with the previous 12 years or so they are still lower than what was normal in the previous 40 years:  If interest rates rise the capital value of bonds will fall further.




What do you think?

Thanks

Haven't gilt yields all the way along the curve moved a lot further than the base rate though, much closer to 'historic norms' (pricing in future rises), plus hasn't the risk premium also risen for corporates?

Not sure if global bonds have gone as far as UK yet though?

My portfolio consists of two asset classes, global equities and some sort of volatility reduction asset, ideally inversely correlated with return on equities.  Recently that has been cash, but I am thinking it may now be time to move into a global bond fund.

[Deleted User]

Yes, I think so. At one point bonds provided zero chance of positive returns in real terms.  Thats no longer the case.  They are back. 

Exactly what will happen depends on two factors:
1. Inflation.
2. Central bank’s bond buying/selling stints