Tim Hext: Why bonds still look better than term deposits

Have investors missed the boat on bonds after they touched 5% in October?

No, says Pendal’s head of bond strategies Tim Hext. In this latest Pendal fast podcast he explains why.

"When I look across the spectrum of what you can buy in bonds, government bonds are around 4.5%, state government bonds 5.25% and bank debt around 6%.

"On term deposits, my question to investors would be: Okay, let's assume term deposits are at 5% and you're locking yourself into those with no liquidity.

"Where do you think on average they're going to be over the next five or 10 years?"

"I think most people would assume they're going to be a little bit lower, not higher; and that cash rates will come down rather than go up a lot more.

"And yet, right now you can lock in, for five or 10 years, rates above 5% in bonds.

"The other advantage of bonds is that they're liquid.

"You can sell them anytime. You're not locked up like you are in a term deposit.

"That's particularly important, that if you saw a sudden sharp sell-off in equities and you're wanting to buy them — but your money's locked up in term deposits." 

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Find out more about Pendal's fixed income strategies at pend.al/fixedinterest

Pendal is a global asset manager. Find out more at pendalgroup.com

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