Bond investing: Picking up pennies in front of a steamroller?

No asset has divided opinion in the investor community over the past seven years like government bonds.

Today, more than $14trn of debt is yielding below zero, with almost 25% of Bloomberg Barclays Global Aggregate index yielding below zero. Historically, for government bonds, we know the starting yield has been an incredibly powerful determinant of future returns and yet investors appear content to take low or even negative prospective returns. So, what role do bonds play? As a general rule, long-term government bonds are negatively correlated to large-cap stocks. There will be periods when the two asset classes move together (such as in the taper tantrum of 2013) but they tend to m...