Yields above 5%? The shares that can still thrive

Mm.

So yeah, um, bond yields have been rising, uh, for some time.

I mean, um, arguably really since the, um, since the pandemic.

Uh, we had, you know, years and years, decades even, of falling bond yields.

Mm.

And then come the pandemic, the return of inflation, bond yields started, uh, rising again.

They've actually r- rather accelerated recently, and, you know, it's not hard to understand why bond yields are, are rising.

I mean, I, I think there are three main reasons.

The first is inflation.

Mm.

Uh, clearly inflation is, um, is, is a problem at the moment, uh, because of what's going on in the Middle East.

Oil price.

The oil price is a key driver of inflation, and, um, you know, we're seeing no end in sight to, uh, to the situation in the Gulf, uh, that is pushing, uh, oil prices higher, and that's, that's feeding through into inflation.

That's one element.

And just before we move on to the others-

Mm

... that's a problem because central banks are thinking about how they're gonna control that higher inflation.

They can't do much around global energy prices, but what they're guarding against is a sort of widening out of inflation.

Um, in the US they're already raising rates.

Lots of expectation that we'll raise rates here in the UK.

Mm.

Uh, remains to be seen, but that's how the inflation translates to higher rates.

Yeah, that is the, that is the, the, the usual sort of knock-on impact of higher inflation, is that interest rates rise.

Um, the problem is, and you've kind of hinted at the problem there, the, the problem is that when the, when the driver of inflation is sort of global events outside the control of the central banks, raising interest rates doesn't really necessarily have much of an impact other than to slow other parts of the, uh-

Yeah