This is the view of Ashburton Investments’ head of fixed income, Albert Botha. He says: “Over the past three years, we have seen bonds return 15.4%, 11% and 7.4% respectively. By comparison, equities, as measured by the FTSE/JSE All Share Total Return Index, have struggled over the same period, returning 2.6% and 20.9% in 2016 and 2017 respectively and showing a loss of 8.5% in 2018.”
He says that for 2019 yields on bonds that matured in seven to 12 years’ time offered attractive return prospects, particularly when considering South Africa’s inflation rate expectations.
“Over the past decade, bonds have returned 3% above inflation. Given the current market consensus for Consumer Price Index inflation of 5.2% for 2019, the 10% nominal return currently offered, for example, by the R2030 government bond maturing in 11 years’ time, means a prospective 4.8% after-inflation return - higher than what we have seen in a good while.”
He says there are risks facing financial markets.