Bond-Bulls: Cash Still Isn’t Trash – December 16, 2024



A just-published report discussed the likely path ahead for global policy rates, bond yields and yield curves, while outlining our investment strategy across global fixed-income markets.

It was a rollercoaster year with limited returns for G7 government bonds (which have underperformed cash!). However, 2024 has been rewarding for corporate bonds and EM debt, which benefited from the pro-growth pivot in monetary policy and ongoing global economic expansion.

Next year will be challenging for fixed-income markets, with lower returns expected than in 2024. Sticky DM inflation will push up inflation expectations, the term premium, and bond yields. Corporate bonds and EM debt should continue to outperform, but already tight spreads will limit absolute total returns.

We recommend staying below benchmark duration, overweight inflation protection, and bet on a further steepening of the DM yield curve. Regionally, we remain underweight government bonds in the U.S. and Japan, neutral on the euro area (with a downgrade bias), and overweight in weak-link economies.





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