High-quality and investment-grade bonds offer a compelling opportunity for investors right now, according to UBS.
While many are tempted to stay in cash during times of uncertainty, the bank believes locking in yields from bonds makes more sense as interest rates begin to fall.
In its latest regional outlook, UBS says the Bank of England is unlikely to make a dramatic move at this week’s rate-setting meeting, but a gradual cutting cycle remains on track.
Some Monetary Policy Committee members may even push for an immediate cut. With inflation cooling and growth tepid, UBS expects base rate reductions in August and November.
Against that backdrop, bond markets look attractive. As central banks globally begin easing, returns on cash will likely drift lower. Bonds, on the other hand, can provide steady income and downside protection, UBS argues.
Although UK data has been mixed, April’s GDP saw its sharpest drop since late 2023, UBS maintains its 1% growth forecast for 2025.
It also cautions against reading too much into monthly figures, which are often volatile.
For investors seeking stability with a return, the case for high-grade fixed income, according to UBS, has rarely looked stronger.