“By the time the Reserve Bank is actually tightening rates, the market has already factored that in. And that’s what we’ve seen this year,” says Tim Hext, head of government bond strategies at Pendal. “But I think it’s fair to expect bond yields to finish next year slightly higher than where they are now. The market is looking for official rates to be around 75 basis points higher,” he says. Hext thinks that is too much. “With that in mind, bonds are not bad value around the current levels. And of course, bonds are a defensive asset. It’s not the central case scenario but if everything goes wrong, bonds will perform that function,” he says. “Are you going to make a lot of money out of bonds next year? Probably not. But will they be a good defensive asset given where yields are. The answer is yes.” TIm Hext is head of Pendal Group's government bond strategies. Find out more about Pendal’s fixed interest strategies here. Pendal is an independent, global asset manager. Find out more about Pendal here.See omnystudio.com/listener for privacy information.

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