Bonds to outperform other asset classes
The local credit market is throwing up ‘once in a lifetime’ investment opportunities this year as interest rates fall and a slowing economy puts pressure on equity values, according to Aberdeen Asset Management.
Fixed income product and investment specialist Leanne Bradley said bond investments are set to outperform other asset classes during this year.
“As interest rates start to peak and the cycle turns, it’s time to ensure you have bonds in your portfolio to take advantage of the returns from interest rate cuts,” Bradley said.
“This is because as interest rates begin to ease and cash returns fall, domestic bonds not only deliver an income yield but also appreciate in value.”
She said, for example, that a rate cut of 1 percentage point would lead to a gain of 3 percentage points in bond prices with a duration of three years, all other things being equal.
“This expected rise in bond prices would enable investors to offset weakness in equity prices and support superannuation returns.”
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