‘Mad’ bond demand a sign of extreme times

Wealth firm Andrews Gwynne has branded demand for some bond products “mad” and a sign of how extreme markets have become. 

In a recent portfolio update, the firm revealed plans to shift its bearish portfolio further from equities on the back of what it saw as extreme market conditions.

The Leeds-based wealth manager will reduce its long-only equity allocation and increase exposure to some low-volatility and market neutral funds.

“We are becoming increasingly concerned with markets, especially in credit where the yield on European High Yield bonds has been trading lower than 10-year US government treasuries,” the update said.

It noted the recent surge in buyers for Tajikistan’s first issuance of international bonds which raised $500m.

“The demand for this type of investment sounds mad and it simply highlights the odd occurrences happening at the moment in extreme market times, such as perennially bankrupt Argentina successfully issuing 100 year bonds.

“We have felt for quite some time that a storm has been brewing and over the past week this has gained momentum.”

Andrews Gwynne currently holds 11% in cash but expects this to rise in the “coming weeks and months”.

The remainder of the portfolio is 40% invested in independent strategies, 9% in fixed interest and 40% in equities.

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