Schroders research, covering four decades of data, shows how different types of bond have performed when rates were rising.
Demand for income remains strong but investors may be taking on more risk than they realise. We look at how to generate a sustainable income yield across asset classes.
Solid credit fundamentals, a moderate uptick in global economic growth with limited inflationary pressure and a favourable supply-demand balance all point to another good year for high yield bonds.
We expect the current unprecedentedly benign market conditions ultimately to be disrupted and see convertible bonds affording effective protection against this.
Global corporate bond valuations are elevated and insufficient to compensate for risk, but there will continue to be selective opportunities to take high conviction positions.