What goes up must come up down, or so it often seems when we talk about government bond yields. The first full week of July saw yields on 10-year US Treasuries move to their lowest levels since February, with similar action in the UK gilt market. This stands in stark contrast to the big rise we saw in the first quarter of this year, when inflation concerns appeared to fluster bond investors.
With yields moving inversely to prices, this recent fall boosts performance for classic 60/40 equity and bond portfolios. It also confounds long-running doubts about government bonds once again.
It’s equally notable that bonds have remained fairly popular among UK investors this year, despite inflation concerns. Investment Association figures show that fixed-income funds took in nearly £7bn on a net basis in the first five months of 2021, outpacing the net inflow of around £6bn for equity funds.