Volatility is likely to be higher in the next five years, according to Amanda Stitt from T Rowe Price.
Speaking on the FT Adviser podcast, the portfolio specialist in the fixed income division said investors cannot expect to see conditions return to what they were pre-pandemic.
Stitt said longer-dated bonds are most likely to be impacted by this thanks to government debts.
She said: “We got used to, post financial crisis, an environment in fixed income of low volatility and that was artificial low volatility.
“This past cycle we had started the hiking cycle where we moved from quantitative easing to quantitative tightening.
“If clients or investors are expecting to go back to what we had, back in post global financial crisis, they will be sorely mistaken because that volatility wasn’t real, it was kept artificially low.”
Stitt added government debt could create volatility in the long-term as well as short-term.
“For the next five years, if I can forecast anything, it is that volatility is going to be higher than what we saw pre-Covid, post financial crisis.
“It will change though it is not going to be at the front end as it was in the past two years. It is going to be at the back end of the curve, particularly because we have so much debt now from governments.”
“That is a lot of debt to digest by the markets, they are doing a good job of it now, but who is to say that debt supply dynamic changes over the course of 2024 and that could create some volatility over not only the short term but the longer term as well.”
You can listen to the podcast by clicking on the link above.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
