'Year of the bond' will be bumpier than expected

Stickier than anticipated inflation

A dramatic turnaround in the performance of fixed income has led to some investors deeming 2023 the 'year of the bond', but experts have warned the path may be bumpier than expected.

In 2022, bond markets saw one of their biggest declines on record as persistently high inflation and a wave of interest rate increases drove government bond rates to reach their highest levels in more than a decade.  However, higher yields, falling inflation and the prospect of interest rate cuts buoyed a rally in the bond markets at the start of this year. The Bloomberg Global Aggregate bond index has risen 2.8% year-to-date, following a 16% drop over 2022, while the S&P US Aggregate Bond index declined 12% in 2022, but is up 2.5% year-to-date, according to the respective index provider...