Bond yields are likely to rise, but should be capped by institutional demand and a more disappointin...
Bond yields are likely to rise, but should be capped by institutional demand and a more disappointing outlook for 2005. We would therefore suggest that, on a longer-term view, a portfolio of higher-rated corporate bonds will offer solid returns, particularly if measured on a risk-adjusted basis. Overall, bond yields look too low against our fundamental model, which suggests 10-year yields should be closer to 5.25%. We also expect the recent disinversion of the yield curve to cease as overall yields rise, while there is a risk demand for longer-dated assets will increase as investors s...
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