Just like their equity counterparts, government bond markets have also experienced a volatile year so far. Continued government spending, sticky inflation and hawkish central bank outlooks have caused yields to fluctuate.
Raising debt is fundamental for governments to fund public spending. Just like any other loan, these bonds come with an interest rate (yield) to offer the lender or investor a return on their capital. Government bonds are typically viewed as less risky and therefore the yields for these bonds are lower than high yield corporate bonds.
More recently, investors have been demanding more compensation for funding the deficits of governments who are regularly raising their debt levels. As yields go up, bond prices go down as existing bonds with a lower yield become less desirable.
Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can…
