Bowie: Where next for bond yields?

BONDS

Despite record low gilt yields, Ignis head of credit, Chris Bowie, explains why it would be a mistake for investors to shy away from fixed income in their search for positive real returns.

With every government bond in the UK now trading at a yield of less than 3% (see Figure 1 below), income investors can be forgiven for looking to shy away from fixed income in their search for positive real returns. But I believe that would be a mistake, at least in the short term.                   Corporate bonds are cheap. Credit yields, especially real yields, are at all time lows. How can those two opposing statements be reconciled? Quite simply, the difference between the yield on corporate bonds and the yield on government bonds, the so-called ‘sprea...