Kames: Why rate hikes could boost bond liquidity

Rise will remove market doubts

Interest rate hikes by central banks could improve bond liquidity rather than causing it to evaporate, Kames Capital's Adrian Hull has said.

The company's fixed income specialist (pictured) said rate increases in the US and the UK will remove the uncertainty currently present in markets and may provide a boost to fixed income assets. "Liquidity has worsened in the last three months, but while it is not going to return to anything like pre-crisis levels, a rate hike will not make it worse," Hull said. "On the contrary, there is an argument that rate rises in the US and UK may actually improve liquidity by removing the uncertainty that pervades markets." His comments directly oppose the view of many commentators, with Ban...