Kleinwort Hambros: Time to give government bonds another chance

Added 20th March 2017

Kleinwort Hambros chief investment officer Mouhammed Choukeir is rethinking his position on government bonds, arguing that the diversification benefits are more obvious now than they were years ago.

Kleinwort Hambros: Time to give government bonds another chance

As the equity bull market continues to mature and the dollar trade looks less appealing, Choukeir is finding some mileage in government bonds, despite their multi-decade yield lows.

“Depending on their risk style, for a multi-asset investor we would still recommend government bonds as they have arguably more diversification benefits now than they did a few years ago,” he stated.

While it is unlikely government bond yields will shoot up by 4% to 6% and that the low growth, low return landscape will change anytime soon, he thinks yields do have the potential to grind higher because of interest rate hikes.

He said: “Government bonds are at multi-year, even multi-decade, yield lows, but we are seeing a retracement of that.

"The Federal Reserve is starting to hike rates and other central banks are going to start exiting the qunatitative easing phase too.

"This is very unique because in the last 10 years all central banks would talk about was continued easing."

Still, "as an asset, it remains expensive relative to its own history,” he admitted.

On the other hand, Choukeir is not sure how much farther the risk assets rally has to go, an area which for the most part continues to look fully valued.

“We have to acknowledge we are in the second-longest bull market in equities in history,” he said.

“There is still value to be harvested and my preference is for European equities in some of the more distressed areas like financials.

"But I like equities to a lesser extent than I did a few years ago when the asset class was more attractive in terms of valuations.”

Kames Income Hub

home_research_centre

Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Premier Multi Asset Global Growth - Alex Farlow
Premier Multi Asset Global...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Kristen McGachey

Senior Reporter

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor.

This native Angelino initially moved to the UK in 2008 to complete her undergraduate studies at the University of Nottingham. She subsequently obtained a Masters degree in Philosophy with Literature from the University of Warwick.

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Edinburgh 2017
PA Edinburgh 2017

Thursday 7 September
Balmoral Hotel, Edinburgh

PA Alternatives 2017
PA Alternatives 2017

Tuesday 12 September
Sofitel St James, London  

PA Dublin October 2017
PA Dublin October 2017

Tuesday 10 October
Westbury Hotel, Dublin

PA US 2017
PA US 2017

Tuesday 17 October
Furniture Makers' Hall

OTHER STORIES FROM LAST WORD...