FAST PODCAST: Outlook for rates, inflation and what it means for bonds | Pendal Group
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FAST PODCAST: Outlook for rates, inflation and what it means for bonds

Investors should be looking to upweight bonds in their portfolios on a medium-to-long term outlook, argues Pendal’s TIM HEXT in this fast podcast

An excerpt from this podcast

Bonds are starting to get towards levels where you could argue in the medium-to-longer term they make a lot more sense.

It’s been very difficult for me as a bond fund manager over the last couple years to recommend that bonds were a good investment down at 1%. The risks were much more to the upside.

We’re now seeing 10-year bond yields get back towards 2.5%…

I think that’s important because most asset allocators are underweight bonds.

Bonds of course are still a defensive instrument. And if we did see a recession or a sharp downturn, they will perform that task.

The beauty of it now is that if you own those bonds up around 2.5% your downside on capital is going to be more limited.

It’s not to say that the surge we’re gonna potentially see this year in services inflation and the economy itself, won’t see rates move higher than there.  It’s not a wall it hits.

All I’m trying to do is make the point on a medium-to-long term basis at 2.5% I can sit here and tell people that bonds are no longer expensive.

They may not be cheap, but at least you should be looking to upweight them in your portfolio for a medium-to-long term outlook.

Listen to the full podcast above


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About Tim Hext and Pendal’s Income & Fixed Interest boutique

Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.

Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

Find out more about Pendal’s fixed interest strategies here


About Pendal Group

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

In 2023, Pendal became part of Perpetual Limited (ASX:PPT), bringing together two of Australia’s most respected active asset management brands to create a global leader in multi-boutique asset management with autonomous, world-class investment capabilities and a growing leadership position in ESG.

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