While current risks in bond risks have not been fully eliminated, the convergence of price correction and valuation in the bond markets represents both risks and opportunities, according to Swa Wu, investment director, fixed income, at Schroder Investment Management (Hong Kong).
This makes it “a favourable time for medium- to long-term investment,” she said in a note today.
Credit spreads have been relatively tight during the past year, but have recently widened as market conditions have changed, “making the bond market more attractive for medium- to long-term investment”.
For long-term investors, bonds offer better benefits in terms of pricing and interest than non-interest-bearing cash or volatile gold as hedging options.
In Wu’s recent exchanges with investors, the most frequently raised questions since reciprocal tariffs were announced include whether US Treasuries can maintain their status as risk-free interest rate securities, and whether the US political situation and geopolitical events will have a structural impact on the overall bond market, she said.
Regardless of the reliability of that news or the need to speculate on market trends, the essence of investing suggests that to reduce volatility, investors should diversify, Wu argued.
This provides an opportunity for investors to review their allocations and avoid excessive concentration in a single market.
“While the US stock and bond markets have been popular in the past, the unpredictable nature of macro events indicates that now is the time to actively diversify across regions and types of bonds to effectively reduce portfolio volatility and seize long-term investment opportunities,” Wu concluded.
