Schroders global deputy head of fixed income Karen Wright, fixed income investment director Michael Lake, and Jonathan Snow pointed out that from a historical perspective, now may be the best time to invest cash in government bonds. Recent changes in financial markets reflect the possibility of interest rate fluctuations, and there are several compelling reasons to support investors reconsidering buying government bonds. Government bond valuations are low, with high coupon rates providing a certain level of hedging. After facing challenging years, government bond valuations are currently low compared to historical prices or relative to other asset classes such as stocks. US Treasury bonds have now fallen to levels before the global financial crisis. Rising coupon rates have allowed government bonds to truly replace stocks and other income-generating assets for the first time in many years. In addition to the level of bond yields, higher coupon rates (or returns) can provide some hedging benefits for investors. Government bond returns consist of both price and yield parts, so higher levels of stable income, reflected in total returns before any losses, give investors the ability to withstand a greater risk of price depreciation. Benefiting from economic slowdown and slowing inflation, returns on investment will be lucrative when interest rates peak. As government bonds are sensitive to inflation and interest rate changes, changes in the global macroeconomic environment are the main factors affecting the trends in government bonds. Continuous good news on inflation and interest rates helps eliminate two major obstacles government bonds have faced in recent years. Schroders global investment benchmark predicts a soft landing for the global economy. However, the bank also notes that an increasing number of warning signals suggest that a soft landing may be more difficult, prompting global central banks to ease monetary policy again. This does not mean that the next round of interest rate cuts is imminent, but as the financial markets begin to digest these messages, it will provide additional support for government bonds. This also implies that deposit rates are likely to decrease, significantly reducing the attractiveness of cash, and investors holding short-term deposits will face higher reinvestment risks. More importantly, investors do not need to wait for global central banks to ease monetary policy to invest in government bonds. As economic growth gradually slows and inflation eases, and as the tightening cycles of most developed countries' central banks approach their end, historically, now is often the time when bonds produce the most lucrative returns. Evidence shows that in the period after the last interest rate hike in a tightening cycle, government bonds consistently outperform cash. Expected to reverse its relationship with stocks, government bonds can increase returns in various ways. Historically, government bonds have had an inverse relationship with stocks, reflecting that when stock returns are negative, government bond returns are usually positive, and vice versa. However, during periods of rising interest rates, the two are more likely to have a positive relationship. The recent impact of tightening cycles driven by high inflation has affected this normal relationship, leading to a change in the correlation between bonds and stocks. Nevertheless, there are signs that government bonds and stocks are expected to return to their traditional inverse relationship. As unemployment rates begin to rise (as is currently the case in the market), the correlation between stocks and bonds is likely to turn negative. This is because global central banks may cut interest rates in response. If this trend continues, government bonds will once again serve as a good diversification investment. Although government bonds continue to face challenges, there are still investment opportunities within them. The vast supply of funds to meet the spending needs of governments worldwide, as well as the implementation of quantitative tightening (a monetary policy tool used by global central banks to reduce the flow of funds or money supply in the economy), has caused some financial markets to face resistance. However, by taking an active approach to government bond investment and using various methods to increase returns, these challenges may also bring opportunities. These methods include managing overall maturity, seizing investment opportunities arising from cross-market differences, implementing yield curve strategies (aimed at taking advantage of expected changes in the shape of the government bond yield curve), and engaging in strategic asset allocation, such as investing in government-related securities that offer premiums over government bonds. Finally, the key to addressing future financial market risks is to adopt a flexible investment approach.