When bonds go bad at times of crisis - and what to do about it
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Structural risk management important
Chris Teschmacher
The prospects for traditional developed market government bonds look bleak. Low starting yields mean potential returns are low, and even in the case of an economic shock, there is limited space for government bond yields to fall further.
In 2020, in the face of the worst economic recession in centuries, the European Central Bank could not cut rates, and gilt yields only fell 0.6%. The efficacy of bonds as a safe haven asset class in risk-off periods has, in our view, been heavily compromised.