Higher-yielding bonds carry higher volatility and should be sized according to your goals and time horizon, and with a clear understanding of what determines their performance. yields (= government bond yields) could rise further, and a longer dated government bond-heavy allocation may be more vulnerable to “rate risk”. If your bond allocation is concentrated in developed market (DM) government bonds, it may be worth looking beyond traditional index-like exposures (40%–50% of which, by market value of outstanding debt, are made up of government bonds) into active management. Diversification spreads a bond allocation across different return drivers, and emerging market (EM) bonds are one part of that wider opportunity set worth a fresh look.

Bonds have been in the spotlight in recent weeks, from the Fed’s first rate hike since 2023 to the sharp rise in long-term Treasury yields, and several clients have asked what they should do next for their bond allocations.

First of all, to put things in perspective, the credit market has held up well through a year of shifting interest rates amid strong corporate fundamentals and low default rates. Credit spreads, the extra yield investors receive over government bonds for lending to companies, are near their tightest in a decade, which suggests that the market is signalling confidence in the economy. Second, there is a strong correlation between starting yields and forward returns, and the higher base yields we are seeing today bode well for future returns.

Finally With the crisis in Middle East the bonds market much better then stock market as it depend on your perspective view of it .