• Sovereign bonds have had a great run, but with yields near record lows and global growth improving this is unlikely to continue.
• A 1994 style bond crash is a risk, but unlikely at this stage as it’s hard to see monetary tightening this year. The most likely scenario is a gradual grind higher in bond yields. This could still see bonds return zero this year.
• Very low bond yields highlight the need for active fixed income management where the portfolio manager can increase the exposure to less vulnerable credit and reduce a portfolio’s duration to limit the impact of a rise in bond yields.

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