Why rising rates should not deter bond investors

The case for keeping bonds in porfolios

There is every likelihood bond yields will eventually trend higher and revert to our estimate of fair value, but we cannot predict (nor can anyone) the path or timing.

The danger here is trying to time the market by exiting bonds in an attempt to re-enter when interest rates normalise. Additionally, even with a muted return outlook, we think bonds play a valuable role in a diversified, multi-asset portfolio. Therefore, we have maintained bond exposure across our portfolios, but we have taken steps to mitigate the potential losses caused by rising rates. Further to that, we would argue that we have been here before. Even though yields on US bonds have doubled since mid-2016, bond investors are again wondering how to handle this environment. After all...