Consider bonds to diversify against stock market risk Consider bonds to diversify against stock market risk Consider bonds to diversify against stock market risk

Consider bonds to diversify against stock market risk

Althea Spinozzi

Head of Fixed Income Strategy

Summary:  As real rates continue to soar on both sides of the Atlantic, financial conditions will tighten further, putting more pressure on risky assets. Yet, record-high bond yields might present an opportunity for investors looking to secure a stable cash flow and create a buffer against a stock market downturn. This piece looks at bond opportunities in the short and long part of the yield curve in the US, Europe, and the UK.

Historically, bonds have played a crucial role in diversifying portfolios’ risk and reducing overall volatility.

As we discussed in Saxo’s recent quarterly outlook, central banks might need to keep a hawkish bias as inflation remains elevated despite the economy decelerating sensibly. Therefore, long-term rates might continue to soar while the front part of the yield curve remains anchored.

Within this environment, we favor high-quality short-term bonds. Yet, as we approach a peak in yields, income seekers are presented with the opportunity to lock in decades-high yields.

Below, we want to provide a comprehensive list of short and long-term high-grade for inspiration purposes.

USD "magnificent seven" bonds

USD Government bonds

USD Corporate Bonds

EUR Government bonds

EUR Corporate bonds

GBP government bonds

GBP corporate bonds


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