Bond Market Rout May Be Behind Us: RBC BlueBay CIO

The global bond market rout may be coming to an end after central bank rate hikes, according to Mark Dowding, chief investment officer at RBC BlueBay Asset Management.

Dowding believes that a number of factors have contributed to the recent volatility in government borrowing costs, including inflation worries driven by rising energy costs and competition from corporate bond sales in the tech sector.

The average yield on debt issued by the G7 economies has jumped to 4.165%, its highest since June 2008, with a nearly three-quarter point increase so far this year and set for its largest annual increase since 2022.

Last week's rate hike by the Federal Reserve boosted the credibility of the US central bank's ability to contain inflation, according to Dowding, who now has a more constructive view on owning duration.

BlueBay has adopted a more cautious approach to long-dated government bonds due to concerns about high debt issuance and fiscal prudence in major economies.

Dowding remains concerned about the UK's public finances and rising borrowing costs, warning that the new finance minister John Healey's options are limited.