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By David ENNETT, co-manager of the Artemis Funds (Lux) - Global High Yield Bond, at Artemis IM
It is usually assumed that rising interest rates are bad news for bond investors, but then it is also assumed that markets act rationally. In reality, rising interest rates hurt some bonds a lot more than others – and opportunities present themselves for astute investors if the market does not grasp this difference. Right now, as central banks accelerate the move towards tighter monetary policy and markets respond, high yield bonds – currently offering around 7.5% yield – are looking attractive.
First, the basics. When interest rates rise – or are expected to do so – investors naturally demand a better yield from bonds they already hold. They will...
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