2008’s star investment
The flavour of 2008 is shaping up to be Australian government bonds as investors seek capital preservation during uncertain times, according to the latest Schroder Investment Management market outlook.
Penned by the asset manager’s head of fixed income and multi-assets, Simon Doyle, the report claims that Australian government bonds should deliver decent positive returns during 2008 as risk assets rapidly decline.
Asset market performance during the last 12 months support this outlook, with government bonds delivering 1.4 per cent compared to the negative 14.5 per cent of listed property trusts, negative 6.0 per cent of Australian shares and negative 6.6 per cent of global equities.
“2008 may be the year when Australian government bonds creep their way back into the hearts of investors,” Doyle said.
Doyle believes that for the next few months at least volatility is likely to remain elevated, with global credit spreads continuing to widen and equity markets trending lower.
However, he added that, as a result, credit and liquidity risk premiums would be restored across the curve, eventually making credit assets attractive again.
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