Government bonds examined

Global bonds have provided benefits for UK investors in terms of higher returns and lower volatility versus gilts over the last 10 years

Over the last 10 years, global bonds, currency-hedged, have provided an annualised return of 6.9%, while gilts have provided a lower return of 5.5%. Global bonds have outperformed gilts in eight out of these 10 years. The volatility of global bonds, currency-hedged, has also been lower than gilts, 3.0% versus 4.7%, as seen in Graph 1. If the global bond portfolio had not been currency-hedged, the annualised return over these 10 years would have been 7.5% and the volatility much higher at 8.7%. For example, there was a negative return of 8% in 2006 and a 57% gain in 2008. Returns from gov...