The effect of future rate rises on the bond market

Bond yields are at historically low levels but are expected to remain stable until the US Federal Reserve begins to tighten monetary policy. Axa senior investment strategist Nigel Richardson says global bond yields, led by the US, are below long-term fair value levels. 'The yield drop reflects a number of factors: perceptions about the risk of future growth, weak economic activity, an asset-allocation shift out of equities and the fact that real short-term interest rates have been lowered to below zero,' he says. Over the long term, Ri-chardson notes, US yields are likely to return to...