The Case for Government Bonds

Rising yields have weighed heavily on government bonds. But beyond this gloom, the safe haven status of Gilts makes them an important holding for long-term investors

Ali Masarwah 1 April, 2021 | 10:20AM
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Bond yields are picking up around the world. In the US, 10-year government bond yields have risen from 1% to 1.7% in less than two months. In Germany, the current yield on public bonds has risen from -0.57% to -0.37% since the end of January. While this may be welcome news to income-seekers, these shifts have caused investors to suffer losses on the bond portion of their portfolios.

But fund and ETF investors should not necessarily ditch these holdings, which can still provide a valuable protective buffer to stock market moves. Government bonds have performed well in past equity market downturns, giving stability to mixed portfolios in a way that corporate, high-yield or emerging market bonds cannot.

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Ali Masarwah

Ali Masarwah  was the editor of Morningstar.de in Germany.