Despatches  

The outlook for bonds in an inflationary environment

  • Identify why bond yields have been falling
  • Understand the relationship between interest rates and bond prices
  • Describe the different types of bonds
CPD
Approx.30min
The role of bonds in an inflationary environment
With inflation hitting a 30-year high in the UK and interest rates on the rise, do bonds still have a role to play for income investors?
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Bond investors enjoyed a highly lucrative decade from the end of the global financial crisis to the start of the pandemic, as persistently low inflation and interest rates, combined with central bank asset purchase programmes, meant that even as economic growth returned, bond prices stayed high. 

But the rapid return of growth, this time accompanied by sharp inflation, has precipitated interest rate increases from central banks, and with the promise of more of that to come, bond prices are falling, and investors are calling into question the fundamental role of bonds in portfolios. 

A major issue for investors is that while bond prices have started to fall, yields are still considerably below inflation. 

This report will examine the immediate term outlook for bonds as an asset class, and the options available to investors from the different types of bonds.

This report comes with an indicative 30 minutes of CPD. 

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Which credit rating denotes a bond is High Yield?

  2. According to David Roberts, at what level does he think the bond market expects interest rates to be at in a year's time?

  3. What is the value of the current stock of UK government bond purchaes?

  4. What is the coupon on a bond?

  5. Which type of bond is most sensitive to central bank interest rate movements?

  6. What is the current UK base rate?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify why bond yields have been falling
  • Understand the relationship between interest rates and bond prices
  • Describe the different types of bonds

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