Go inflation-linked?

Most bond portfolios currently hold long-dated bonds, but Herman Steyn and Guy Toms, managers of the Nedcor Retail Investments Nedbank Bond Fund, believe fixed rate bonds are rich and that there is instead “value” in inflation-linked long bonds as an alte

Bonds are currently discounting inflation in the order of 4% – 4.5%

“While we see more value in the nominal bonds now that rates have risen, and we are comfortable with the inflation scenario, we still believe fixed-rate bond yields have room to rise.”

Risks in the bond market to be monitored over the year, says Toms, include:

*Unexpected rand volatility that could push up domestic prices

*The widening current account deficit

*Rising inflationary pressures in the US

*Consumer spending and credit growth

*Investor appetite for emerging market debt