Where to put your money as the bond markets head for a sell-off

If you’re nervous about bonds but reluctant to move into riskier assets, just where should you put your money? David C Stevenson has some suggestions.

The coming sell-off in bonds is one of the worst-kept secrets in finance. The British government is paying investors just over 2% to lend it money for ten years or more. That's poor value for everyone except the Treasury.

With inflation above 2.7%, this implies you won't even break even in real terms (after inflation). Yet knowing bonds are poor value, especially if inflation starts rising in any recovery, is different from predicting when the upheaval will happen. Yields on longer-term government securities (gilts) could go even lower if bearish investors are right about Britain turning into the next deflationary Japan.

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