Bonds likely to face multi-year bear market

ON BONDS

LGIM's Richard Hodges says he is bullish on rates but bearish on duration.

Over a relatively short period, investors have changed their perceptions of the world from being a dark and dismal place to one where growth is almost guaranteed. Our view is growth will be stronger than the world assumes (with the exception of the UK, sadly), but there will be consequences that have to be addressed. Such an environment should naturally play to higher-risk asset classes, and equities have performed strongly of late. We like high yield. Default rates are likely to drop to about 2%. However, the global high yield market is still offering about 6% more than treasuries...