The bond market faces "strong headwinds" for some time as summer volatility returns and markets anticipate interest rate hikes, according to Invesco Perpetual's fixed income team.
The managers warned rising interest rates will inevitably impact bonds while liquidity and the lack of quality new issuances in the market is also a challenge. Michael Matthews, co-manager of the £5.5bn Corporate Bond fund, alongside co-heads of fixed income Paul Read and Paul Causer (pictured), said: "In January, we saw 10-year [UK] government bond yields at 1.3% and now they are over 2%. There is a quite a move in quite a short space of time and a 5% capital loss. "It is quite a strong headwind. Rates will go up and yields will go up. Those headwinds will be around for some time." ...
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