Why Bonds for De-Risking? An Honest UK Answer

Bonds do three jobs in a portfolio: pay a yield above cash, gain value when interest rates fall (typically during recessions, when equities suffer), and lock in a known return over a known duration.

Money market funds and cash savings accounts deliver job 1 well but cannot do jobs 2 or 3. They float with overnight rates, so when rates get cut to zero you earn nothing.

The 2022 bond crash was a duration shock - rates rose fast and long-dated bonds re-priced down. That is a known feature of bonds, not a sign they are broken.

The textbook answer (60/40 with bonds) is defensible but not gospel. Short-duration bonds or a gilt ladder do most of the same work with less volatility, and are a fair UK substitute.