Fixed income investors need to go long for returns

ING head of fixed interest Graham Ansell, said those seeking to achieve higher yields without taking on the credit risk would have to look to longer term fixed interest assets, bringing duration risk with it.

"This doesn't mean that (short term) rates aren't going to go higher, but we just don't think that those rates are going to go anywhere near the 6%/7%/8% that we've been used to for the last 15-20 years," Ansell said.

Longer term rates were likely to be volatile due to the opposing forces currently at play, but would remain in a 1% band around their current level, he said. While 10-year rates could go as high as 7% or as low as 5%, they were unlikely to go much further.

"It's not like we'll see long term interest rates going to 8%/9%/10% as we have in the past, but they are still going to be substantially higher than where cash rates are," Ansell said.