Here, we consider some of the concerns investors may have.
We explore some powerful reasons why we believe now may be a good time to add to bond holdings, introducing balance within a well-diversified portfolio.
What's on your clients' minds?
The yield which bonds offer today provides a significant buffer should rates rise. Unlike in the 2022 crisis, a very material rise in yields would be needed for bond returns to turn negative. The graphic below sets out the impact of yield moves on bond returns.
RESILIENCE OF BOND MARKETS
Fixed income markets offer investors a broad range of assets with varying prospects for risk and return. This allows an investor to choose a fund that better fits their risk and return profile.
For example, bonds with a shorter term to maturity are usually less sensitive to interest-rate changes than longer-dated bonds. This can reduce the potential for volatility.
Some investment approaches may seek absolute returns, which can help to significantly reduce the risk of experiencing capital losses. One example is strategic bond strategies, which invest across global bond markets, with the manager adjusting risk exposure based on market conditions.
UNKNOWN RISKS
Even modestly positive economic growth can provide a supportive environment for corporate bonds because unlike shares, bonds don’t typically need evidence of profits growth to pay back investors and support their prices.
Notably, in a recession, central banks might be expected to reduce interest rates to boost growth. This typically leads to capital gains from bonds.
RECESSION POTENTIAL
"You won’t find out about the next credit crisis via a calendar invite"
Damien Hill, Senior Portfolio Manager
Fixed income markets are typically far less volatile than equity markets. Periodic coupon payments deliver reliable income streams, adding a cushion which can smooth overall returns.
Some higher-risk parts of fixed income markets, such as high yield credit, have generated returns comparable to other growth assets, but have historically experienced shallower drawdowns and faster recoveries than equities during periods of crisis.
RISK OF EQUITY MARKET LOSSES
“Major market dislocations are more frequent than you might think. They follow a familiar pattern, where investors question assumptions that they confidently held just a few weeks earlier. An essential skill in active management is the ability to transform sudden bouts of market volatility into investment opportunities.”
Peter Bentley, Global Head of Fixed Income
An active fixed income manager will typically build a highly diverse portfolio of debt issued by many different companies or governments. This makes bond portfolios far less reliant on the performance of any single company.
CONCENTRATION RISK
The level of absolute yields available in bond markets is at the highest seen before the global financial crisis, especially at longer maturities. This means bond markets offer a compelling, income-based return.
If equity markets were to fall sharply, interest rates could decline, and this could also present the opportunity to generate capital gains from bonds.
How can bonds help?
EQUITY VALUATIONS
I'm uneasy about the possibility of bond market losses
I’m uncomfortable with the risks my investments are exposed to
I'm worried about economic growth and companies being able to sustain their profits
I’m worried about the risk of negative returns
I’m concerned that a small number of companies now dominate equity markets
I've heard that US stocks are very overvalued and I'm worried they might fall
How can bonds help?
How can bonds help?
How can bonds help?
How can bonds help?
How can bonds help?
Higher yields provide protection
Current yield (USD)
Return if yields fall 1%
Return if yields rise 1%
Breakeven yields rise
Global high yield corporate
If yields don't change, the yield is your return
If yields rise, return is lower, given bonds have fallen in value
How far yields can rise before bond returns turn negative
4.3%
10.2%
-1.5%
0.7%
2.1%
6.5%
9.5%
3.4%
Source: Bloomberg, Insight Investment as at 31 December 2025. ICE BAML indices (Global investment grade corporate: G0BC, Global high yield corporate: HW00). For illustrative purposes only, not a forecast or guarantee. Outcomes may differ materially.
If yields fall, return is higher given bonds have gone up in value
Current duration
Global investment grade corporate
3.1
5.9