Bonds now more attractive than equities

IT HAS been a challenging year for global bond markets in light of the US Federal Reserve’s most-aggressive tightening campaign in decades. While global bonds have tumbled by more than 20 per cent (in USD terms) from its peak, their yields have increased by more than two-fold.

We believe that investors should start paying more attention to bonds, as we see value emerging in this asset class.

The case for fixed income

Widening credit spreads as the market prices in an economic slowdown, combined with monetary tightening, have pushed today’s global bond yields to levels not seen since 2009. Yields of investment grade (IG) bonds in Asia and globally have climbed to a high of around 6 per cent and 4 per cent, respectively.