The bond market is facing uncertainty as investors weigh slowing economic growth, inflationary pressures, and central bank policies.
The Bank of England has halved its UK GDP forecast for 2025 to 0.75 per cent, reflecting broader concerns about economic weakness, while monthly GDP fell by 0.1 per cent in January, following 0.4 per cent growth in December.
Despite expectations for interest rate cuts, inflation remains above target, complicating central bank decisions.
While the European Central Bank has begun easing, cutting its deposit rate to 2.5 per cent, the BoE and US Federal Reserve remain cautious.
Analysts highlight the challenge of balancing slowing growth with persistent inflation, particularly as trade tariffs add further uncertainty.
Bond investors are exploring various strategies, with many favouring high-quality corporate bonds and selective emerging market debt.
Some prefer active management to navigate shifting conditions, as passive bond funds struggle with market inefficiencies.
While bonds have underperformed equities in recent years, higher yields are making them attractive again as a portfolio stabiliser.
With tighter credit spreads and higher borrowing costs, analysts stress the importance of careful bond selection.
And despite volatility, long-term opportunities in fixed income remain strong, especially for those willing to adopt a strategic, balanced approach.
This guide, which will explore these themes in more detail, is worth 60 minutes of CPD.
