Watch for the bond bubble

The credit markets have avoided becoming the next bubble waiting to burst. Nevertheless, investors should be cautious of government bonds.

Leading investment managers think there was probably a credit bubble in 2007 which has been and gone. High levels of government borrowing mean that inflation is likely to rise, and while government bonds are making money now, investors could stand to lose a lot in the future.

“I think it’s probably true to describe something as a bubble if the level it trades at is susceptible to a very small change. I don’t think the same thing can be said of credit markets and how they’re trading, not yet,”