In summary
You may have seen recent headlines about rising global bond yields, including UK government bond yields. Matthew Cady, investment strategist at Brooks Macdonald, explains the reasons behind these rising yields, their impact on your investments, and how we are navigating these changes to help protect and grow your investment portfolio.
Global bond yields are rising due to various domestic and international factors. This article explains bond yields, why they are increasing, and how our investment strategy seeks to manage these changes.
Understanding bond yields and their rise
A bond yield is the annual return an investor can expect to receive each year over the bond’s term to maturity. The level of yield can also indicate the risk associated with the bond. For government bond yields, the yield reflects how the economy is performing given the outlook for economic growth, interest rates, and inflation. UK government bond yields have been rising, with investor expectations impacted by both domestic and international pressures.
Domestic pressures on UK government bonds
Domestically, there are concerns about the outlook for the UK public finances, with the UK’s economic growth outlook currently looking more challenging. In particular, the Chancellor’s recent October Budget was widely criticised for risking higher inflation pressures from raising employment costs, while also increasing government borrowing.
International pressures on UK government bonds
Internationally, the recent November US election victory of Donald Trump has raised similar concerns. The incoming Republican administration’s plans for tax cuts and deregulation are likely to keep interest rates higher for longer. While the US has a stronger economic growth outlook, the US dollar’s role as the world’s reserve currency means that higher yields on US government debt can push up government debt yields in other countries, including the UK.
Both of these pressures have led to higher UK government bond yields. However, changes in the yield for longer-dated bonds can have a much bigger impact on that bond’s price than shorter-dated bonds. This is because bonds with a longer time to go until they mature have more time for interest rates to change, and investors can earn more on newer bonds with higher coupons.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/individuals/resources/insights/global-bond-yields-are-rising-what-does-it-mean-your-investments
Global bond yields are rising: what does it mean for your investments?
In summary
You may have seen recent headlines about rising global bond yields, including UK government bond yields. Matthew Cady, investment strategist at Brooks Macdonald, explains the reasons behind these rising yields, their impact on your investments, and how we are navigating these changes to help protect and grow your investment portfolio.
Global bond yields are rising due to various domestic and international factors. This article explains bond yields, why they are increasing, and how our investment strategy seeks to manage these changes.
Understanding bond yields and their rise
A bond yield is the annual return an investor can expect to receive each year over the bond’s term to maturity. The level of yield can also indicate the risk associated with the bond. For government bond yields, the yield reflects how the economy is performing given the outlook for economic growth, interest rates, and inflation. UK government bond yields have been rising, with investor expectations impacted by both domestic and international pressures.
Domestic pressures on UK government bonds
Domestically, there are concerns about the outlook for the UK public finances, with the UK’s economic growth outlook currently looking more challenging. In particular, the Chancellor’s recent October Budget was widely criticised for risking higher inflation pressures from raising employment costs, while also increasing government borrowing.
International pressures on UK government bonds
Internationally, the recent November US election victory of Donald Trump has raised similar concerns. The incoming Republican administration’s plans for tax cuts and deregulation are likely to keep interest rates higher for longer. While the US has a stronger economic growth outlook, the US dollar’s role as the world’s reserve currency means that higher yields on US government debt can push up government debt yields in other countries, including the UK.
Both of these pressures have led to higher UK government bond yields. However, changes in the yield for longer-dated bonds can have a much bigger impact on that bond’s price than shorter-dated bonds. This is because bonds with a longer time to go until they mature have more time for interest rates to change, and investors can earn more on newer bonds with higher coupons.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/individuals/resources/insights/global-bond-yields-are-rising-what-does-it-mean-your-investments
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