government bonds

Dutch pension funds are rethinking government bonds, sparking a shift that could ripple through eurozone yields and global fixed income portfolios.

Friedrich Merz’s failure to secure a Bundestag majority has shaken Berlin’s political establishment and cast serious doubt over the ambitious economic reform agenda promised by Germany’s new coalition government.

World financial markets remained in a radical readjustment phase on Thursday as the implications of Germany’s fiscal shift continued to reverberate across global debt markets.

Trackers and index funds are the logical choice for investing in US government bonds. Indeed, within long-term dollar bonds, the scope for active management is limited.

The era of negative interest rates on government bonds is over, but the moment when government bonds will again generate both portfolio protection and returns is still far away. Especially in Europe, the situation is tough. The ECB has its hands tied. The need to save Italy means Eurozone interest rates can only rise so much. “Make no mistake about it: the next six months won’t be pretty.”

As yields increase, several fund houses have recently bought European government bonds, following the ‘huge sell-off’ in this market. In the meantime, commodities should ease the pain of high inflation.

Investors awaiting higher yields on government bonds have systematically been missing out for four decades. While market rates are rising, bondholders remain on the edge of their seat. With central banks set to tighten monetary policy, the question is: who is going to buy government bonds?

2022 will be another exciting year for financial markets. Investors operate in an environment of persistent inflation, foggy central bank policy and uncertainty about the Omicron variant. It is a search for yield and protection in the portfolio. But how?

“Due to the search for yield, a “shut up and take my money” sentiment is starting to emerge in the world of high-yield corporate bonds. Investors would be wise to be more cautious in allocating money to the high-yield markets. It is dangerous to stay in the highest-risk segment with the idea that things will go well for another six months”, according to Sander Bus, managing director and co-head of the credit team at Robeco, speaking in an interview with Fondsnieuws, Investment Officer Luxembourg’s sister publication.

Every day, Natixis IM’s head of multi asset James Beaumont and his team wonder how much higher the equity markets can go. Yet, according to him, the issue that is keeping multi asset investors awake at the moment is something else. What should they do with government bonds?