Longer-dated Bonds - Stick or Twist?

Our Client Portfolio Manager, Kameel Kapitan, gives an update on the current outlook for longer-dated bonds. 

• Government bonds can be considered in two dimensions – the ongoing coupon-based return associated with their ‘yield’ and the potential gain or loss associated with their price rising and falling, the magnitude of which is related to their interest rate sensitivity, or ‘duration’.
• Times have moved on from the ‘return-free risk’ which mid and longer-dated UK government bonds arguably offered investors two to three years ago, with these investments now offering higher levels of yield.
• However, our sense is that, for the moment, bond-oriented portfolios should continue to have a bias towards shorter-dated bonds. At this time, these offer higher ongoing yields, at lower levels of volatility than their longer-dated peers making them an attractive investment for lower risk investors.

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