There’s still money in bonds for careful investors

Investors should tread carefully in the fixed-income market. But this well-managed investment trust fits the bill.

Pizza Express: looks tasty, but it’s a value trap
(Image credit: Credit: Mark Waugh / Alamy Stock Photo)

With ten-year UK government bonds yielding well under 1%, the consensus view on the bond market is overwhelmingly bearish: even if inflation stays around 2%, governments’ reluctance to control fiscal deficits implies more bond issuance, lower prices and higher yields.

John Pattullo, the manager of Henderson Diversified Income Trust (LSE: HDIV) is deeply sceptical about this view. He points out that forecasters have called for lower bond yields in only two of the last 26 years, yet ten-year US Treasury yields have headed remorselessly down, from 7% to below 2%. Moreover, the notion that high fiscal deficits mean high bond yields is “fake news. Everyone focuses on the supply of bonds, but in a flight to safety, demand for bonds also rises”.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.