The Importance of Bonds in Uncertain Times
Chris Iggo of AXA Investment Managers highlights the significance of bonds as one of the most flexible and useful asset classes, especially in uncertain economic times. The increased ongoing yields (coupons) make bonds very relevant again for private investors and savers.
Reasons for the Importance of Bonds
- Security and Stability: German government bonds are seen as a safe haven. They currently offer yields of around 3% for longer maturities (10 to 20 years), which is attractive compared to fixed-term deposits or call money, especially if the money can be tied up for the long term.
- Increased Ongoing Yields: Higher interest rates have led to increased coupons on new bonds, making ongoing yields more attractive. This is particularly important for investors seeking regular income.
- Flexibility through Active Management: Active bond ETFs can quickly adjust their portfolios to market changes, thus managing liquidity risks better than passive products. This increases their flexibility, especially in volatile phases.
- Diversification Effect: Government bonds with medium maturities are recommended to hedge portfolios against risks and reduce volatility.
Key Aspects in the Use of Bonds
- With rising interest rates, price losses can occur, which is why it is often advisable to hold bonds until maturity to avoid losses.
- The creditworthiness of the issuer is crucial: creditworthy issuers offer more security in uncertain times.
- Inflation-protected bonds are gaining importance due to the expectation of a persistent inflation trend worldwide.
In summary: In a challenging economic environment, fixed-income securities are a flexible and sensible asset class thanks to their higher ongoing yields and their role as a stabilizing component in the portfolio – just as Chris Iggo from AXA IM has emphasized. They offer private investors both protection and attractive return opportunities with manageable risk.