Hello All
Does anyone have any thoughts on the medium term future for Bond and Fixed Interest Fund prices? I have read that bond prices go down when central bank interest rates go up, and this does seem to have some logic to it. After a central bank interest rate rise, a fixed interest bond with a face value of £100 still pays the same rate, whereas the rate for £100 in a building society account would typically have increased, making the bond less attractive.
This is of course relevant for many people with pension investments, given that it seems likely that interest rates will rise over the next year or so.
But does the above necessarily mean that the value of Bond and Fixed Interest investments will go down? Or is the likelihood of a rate increase already 'factored in' by the markets. If so, prices would be more impacted by a change in the expected timescale for rate increases than by increases taking place according to an already expected timescale.
Any thoughts or comments welcome.