Market forces are slowly gaining the upper hand on the bond markets, and rising interest rates are once again compensating investors for their risks. At the same time, changing monetary policy also increases the risk of nasty surprises in certain bond segments.
Panic selling by British pension funds allowed the Bank of England to step in as a buyer in an emergency.
“We have now experienced a long phase in which bond investors were not adequately compensated for their risk. That was the result of the very expansive monetary policy of the past ten years. That’s over for now,” says René Hermann, senior partner at credit risk advisor Independent Credit View (ICV). “Now, with interest rates rising and the central banks gradually withdrawing from bond purchases on the capital market, we are again seeing risk premiums that are quite attractive.”