For Investment Professionals only. No other persons should rely on any information contained in this website.

Fixed On Bonds

Premier Miton's Bond Blog


Safer asset bonanza


It may not feel like it, but investing is getting much easier. It is now possible to get better returns and take on less risk. Whilst inflation is at eye watering levels at the moment, it will not remain there and over any reasonable investing time horizon (i.e. 3-5 years) things are really looking up.

TINA is dead and buried

A couple of years ago, when monetary policy was extremely accommodative, investing was really hard going. Shoulders were shrugged as we realised there was no alternative (a.k.a TINA) but to take on a lot of risk. Negative real rates were driving investors into riskier and riskier assets at a time when fiscal and monetary policy was extremely loose. In other words, there was an awful lot of money chasing assets in order to get a positive real return.

5 year real rates are now positive

Source: Bloomberg 31.01.2018 – 30.09.22

Things have changed rapidly. We now have solidly positive real (inflation expectation adjusted) government bond yields over a reasonable investment time horizon. By the time we add on investment grade credit spreads, then the real return from safer assets comfortably outstrips inflation expectations.

The power of compound interest

Taking a selection of short duration investment grade bonds to give a flavour of the returns on offer, we can see that the likes of well rated names such as Rothesay maturing in 2025 yielding 7.6%, TP Icap maturing January 2024 at 8.8% and Admiral Insurance bonds maturing in 2024 at 7.6% (source Bloomberg as at 19.10.22).
At an index level, the sterling investment grade index is yielding 6.58% as at 19.10.22 and compounded returns over an investable time horizon look very attractive

Compound return at a yield of 6.58%

Source: Bloomberg Sterling Aggregate Corporate ISMA Yield to Worst as at 19.09.22.

Safer assets, yield and compound interest

How times change! A few years ago it was hard to trumpet the power of compound interest because the reality was fixed income investors had to take on lots of risk in high yield companies in order to get a yield worth compounding! Well now that government bonds offer a solidly positive real return and investment grade is now high single digit percentage yields, the concept of compound interest from fixed income is alive once again offering excellent returns from safer assets.


The value of stock market investments will fluctuate and investors may not get back the original amount invested.

The performance information presented in this document relates to the past. Past performance is not a reliable indicator of future returns.

Future forecasts are not reliable indicators of future returns.

Government and corporate bonds generally offer a fixed level of interest to investors, so their value can be affected by changes in interest rates. When central bank interest rates fall, investors may be prepared to pay more for bonds and bond prices tend to rise. If interest rates rise, bonds may be less valuable to investors and their prices can fall.

Reference to any particular stock does not constitute a recommendation to buy or sell the stock.

There are times when the issuer of a security (for example, a company that has issued a bond) is unable to make income payments or repay its debt. When this happens it can result in losses for the fund.


Sign up to receive the bond blog straight to your inbox

Important information

For Investment Professionals only. No other persons should rely on any information contained in this document.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice. Reference to any particular stock or investment does not constitute a recommendation to buy or sell the stock / investment.

Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

Issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.



Thank you

Thank you for signing up to receive alerts for new blogs posted on Fixed On Bonds. You will receive an email confirmation.

Important Legal Information

This area of the website is intended for investment advisers and other financial intermediaries whose clients are UK tax residents.

The products offered on this website carry a degree of risk. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back your original investment. Specific risks are highlighted on the respective investment pages in this website.

By clicking on the button below you confirm you are an investment adviser or other financial intermediary authorised and regulated by the Financial Conduct Authority (FCA)