Why Have Bonds Done Well This Year?

Fixed income's ability to thrive when stock markets are crashing has been proved again this year, but investors have sacrificed yield for safety

James Gard 6 October, 2020 | 9:39AM

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One of the key features of bonds is capital preservation during a period of economic stress and stock market volatility. Bonds have again passed this test in a year of global pandemic and economic distress.

Investors have poured billions into the asset class as a result, pushing bond prices up to new highs. But one of the key features of bonds, the income element of fixed income, has gone missing in action this year. With more buyers ramping up bond prices, yields have gone in the opposite direction. Most UK Government debt has a negative yield, for example - unless you want to buy the 30-year gilt and wait until 2050 to get your money back.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

James Gard  is content editor for Morningstar.co.uk

 

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