Interest rate rises blot outlook for bonds

Inflationary concerns and the accompanying pressure to raise interest rates on a global basis are dampening the long-term outlook for the government bond markets. However, Europe is likely to perform better than other markets as inflation is still relatively low and is likely to remain so. Peter Lucas, global investment strategist at Ashburton, says: "We have become bearish most of this year because of the increasing pressure for interest rates to rise." He believes government bonds are expensive compared with historical levels, as the market is over-estimating the risks in interest r...