M&G’s Chorlton Turns Bullish on Bonds
Andy Chorlton, chief investment officer for fixed income at M&G, told Bloomberg Television on Wednesday that the recent rise in bond yields has made the asset class attractive again after years of poor returns. He pointed to positive real yields as the key metric justifying his optimism.
“Real yields are positive. 2% positive in 10-year real yields in the in the US and the UK. That’s not a bad starting point for what is still, in my belief, a low-risk asset class versus all the other things you can buy,” Chorlton said in the interview.
His comments come as global bond markets have repriced sharply, with 10-year real yields in both the US and UK now sitting around 2%, a level not seen consistently since before the 2008 financial crisis.
Why 2% Real Yields Matter for Investors
Real yields represent the return an investor receives after accounting for inflation. When they are positive, bondholders are effectively being paid to hold government debt rather than losing purchasing power over time.
For much of the past decade, real yields on 10-year US Treasuries and UK gilts were negative or near zero, punishing fixed income investors. That regime began to shift in 2022 when central banks aggressively raised interest rates to combat inflation.
Now, with US 10-year real yields near 2% and UK 10-year real yields at similar levels, Chorlton argues that bonds offer a compelling risk-reward proposition relative to equities and other asset classes.
Low-Risk Asset Class With Equity-Like Returns
Chorlton described fixed income as a “low-risk asset class” compared to alternatives, but with yields now high enough to generate meaningful returns. The 2% real yield on 10-year debt implies a nominal yield of roughly 4.5% if inflation averages around 2.5%, though actual inflation expectations vary.
That is a significant shift from the post-2008 era when quantitative easing suppressed yields and forced investors into riskier assets in search of income.
The M&G CIO’s view aligns with a growing chorus on Wall Street and in the City of London that the “death of bonds” narrative has been overdone. Pension funds and insurance companies, which are natural buyers of long-dated debt, have been gradually increasing allocations.
Risks to the Fixed Income Thesis
The bullish case for bonds hinges on inflation remaining contained and central banks avoiding further aggressive tightening. If inflation proves stickier than expected, real yields could fall or turn negative again, eroding the appeal Chorlton highlights.
Additionally, fiscal deficits in the US and UK remain large, which could pressure governments to issue more debt and push yields higher—potentially creating capital losses for existing bondholders even as new buyers lock in attractive yields.
Chorlton’s comments were made on Bloomberg Television on Wednesday, but he did not specify which segments of the fixed income market he favors or provide specific trade recommendations.
What to Watch in the Coming Weeks
Investors will look to upcoming inflation prints and central bank meetings for confirmation of the real yield trend. The next US CPI release and the Federal Reserve’s policy statement will be key tests of whether the 2% real yield holds.
If real yields remain at or above 2% through year-end, Chorlton’s call for a fixed income revival will gain credibility. A sharp drop below 1% would suggest the window of opportunity is closing faster than expected.
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