Reaping real returns
Since the end of 2021, the interest rate world has undergone a seismic shift with central banks abandoning zero interest rate policies, and government bonds suffering their biggest jump in yields and falls in price since the late 1970s. Investors today are faced with an expanding choice of seemingly attractive income opportunities, both in the fixed income asset class and elsewhere. However, what was judged safe up until 2022 may not be so secure in future, given rising debt costs, and thus concerns over long-term debt sustainability. Positioning to profit from real bond yields (excluding inflation) that are the highest since at least 2011 is also an attractive choice for conservative investors, in order to lock in a generous inflationprotected level of income for the next few years.