The latest edition of the FT Adviser podcast heard from panellists arguing that the bulk of 2024’s fixed income returns will come from the long end of the curve, meaning rising bond prices as economic conditions deteriorate.
Fahad Hassan, chief investment officer at Albemarle Street Partners, said long-duration bonds rallied strongly in the final quarter of 2024, and actually ended up delivering returns that were similar to those of shorter duration bonds, despite the latter doing well for most of the year.
As a multi-asset investor, he felt long duration bonds will act as a diversifier if there was a downturn in economic conditions.
Guillaume Paillat, multi-asset investor at Aviva Investors, believed “bonds are mostly priced for perfection right now”, as they mostly reflect expectations that rates will be cut.
But he still felt that “there is room for some capital gains from government bonds”, but there is little room for capital gains from corporate bonds.
A dissenting voice was provided by Lloyd Harris, head of fixed income at Premier Miton.
He felt the strong performance of long duration bonds at the end of 2023 meant there was greater value to be had by owning shorter duration bonds and collecting the income paid by those assets.
david.thorpe@ft.com