Bonds

What are bonds?

 

Bonds represents a state of indebtedness, a bond is a loan issued by governments and corporations to finance particular projects such as building roads or research. These bonds can be traded by investors who will then receive the future payments - including interest known as ‘coupons’ - until the bond matures.

 

Bonds with a fixed interest rate are also known as ‘fixed-income securities’ because the corporation loaning the money can calculate the total sum they’ll receive if a bond is held until it matures.

 

During a period of high interest rate, bonds can become more lucrative as the yield on bonds increases. If the country’s central bank keeps interest rates low throughout the lifetime of the bond, then the yield isn’t likely to be high so they price of bonds is pushed higher.

 

Bond Market News from LGIM

 

As one of the UK’s leading investment managers, LGIM offers knowledge and experience that can bring real benefit to investors looking to understand market movements in both equities and bonds.

 

Find the latest bond market news with MacroMatters, from rates fluctuations and government policies.

 

Our Asset Allocation team includes dedicated and experienced strategists whose focus is to forecast the outlook and the stage of the market cycle for their specialist asset class, including bonds and equities. They work alongside our in-house economics team who focus on assessing the underlying macroeconomic environment. Our economists then work with our team of strategists and portfolio managers to translate their views into what this means at a portfolio level.

Macrobites

Market volatility: Ups and downs, smiles and frowns

One-day corrections of 3% are always painful, especially so when investors have become so accustomed to low volatility after almost a decade-long bull market. We see the move as most likely a technical sell-off (famous last words) and believe it is probably too early to buy the dip. 

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Strategy

Bearish bias on bonds binned

A sell-off in the US government debt market has whetted our appetite for an asset that more and more investors now love to hate. Tactically we have adjusted our view from underweight to neutral.

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Economics

Could Italy’s dolce vita be at risk?

Fears over Italian debt levels have risen sharply following the announcement of the country’s three-year fiscal plan. Should investors be worried?

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Economics

The yield curve ball

The ‘yield curve’ has flattened significantly. This is worrying both investors and some Fed members given its track record of anticipating recessions. But has the yield curve become a less timely predictor in recent cycles?

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