Deep Dive: Is a yield earthquake coming?

Avoid the shocks

Mark Dowding, CIO of BlueBay Asset Management, dives into fixed income

During 2021, investors have been surprised at how long-dated government bond yields have proven firmly anchored at very low levels, even as economies recovered from the shock of the 2020 pandemic recession. This has been even more notable against the backdrop of strong inflation, which central bankers now fear is less transitory than originally expected. With ultra-low long dated yields supporting elevated price-to-earnings multiples, the question whether this low yield regime can persist, seems central to all investors. On one hand, some may argue the natural level of interest rates has...