“A good example is peripheral Europe where a combination of some progress towards structural reform, the curtailment of euro break-up risk by the ECB, and relatively attractive yields has led to a fairly lengthy rally in their government bonds,” he explains.
Meanwhile, Mr Hayes points out that regardless of the credit rating, core government bonds such as the UK and US will remain a safe haven in times of volatility, and as central banks try to ease away from such loose monetary stimulus through actions such as tapering further volatility is to be expected.
He adds: “Don’t rule out government bonds, they will play a very important part in a portfolio at times when we hit periods of volatility as we try to move away from monetary stimulus to a self sustaining economy and self sustaining recovery.
“We’ll have periods of weakness and in that environment government bonds will do well because they are a safe haven asset.”
Nyree Stewart is features editor at Investment Adviser
