Depressed bonds draw investors

DESPITE major losses in the past three years, institutions and retail investors are pouring money into the global bond market.

They are seeking both income and capital gains. The bet of bond bulls is that inflation and interest rates will fall and that the US, European and Asian economies will sag. Such economic and financial circumstances would be ideal for a bond bull market, according to asset managers such as Pimco.

If there is a recession, as several economists predict, sovereign and top-quality investment grade bonds may well outperform equities, property, gold and cash deposits, they say.