How should investors approach investing in bonds in the context of rising interest rates, rising inflation and the euro-zone crisis?

Simon Moore (Asian credit strategist, Credit Suisse) sees value in Asian credit - in particular investment grade corporate bonds.

He sees headwinds such as an anaemic US economy and the debt crisis brewing in Europe.

'That said, we believe Asian bond investors are being compensated for these risks by, in most cases, valuations that are generous,' says Moore. He notes that credit spreads in Asia are roughly double their pre-financial-crisis levels, which he says is difficult to justify on fundamental grounds.

He says demand for Asian credit has been dented by a wave of issuance and a resurgence of corporate governance concerns in the region, but he expects a gradual recovery in the market 'barring a near-term Greek credit event'.

He adds a caveat that recent negative reports on Sino-Forest will diminish demand for high-yield bonds from Asian issuers.

Alexis Calla (global head, advisory and investment, Standard Chartered Bank) says a poor environment generally for investing has boosted demand for safe-haven assets such as fixed income and gold.

However, his longer-term outlook for G3 bonds (bonds issued in the currencies of US dollars, euros and yen) is 'bleak', in the context of soft economies, rising inflation and rising interest rates. For developed markets, Calla is pessimistic over investment-grade bonds and neutral on high-yield bonds.

However, Calla looks positively on high-yield bonds from emerging market issuers. In particular, he likes portfolios based on shorter-dated securities that 'are less sensitive to interest rate increases and can benefit from local currency appreciation'.

'We still expect equity to outperform bonds on a 12-month basis. However, any indication of a prolonged slowdown in global growth may warrant a relook at our fixed income weightings,' says Calla.

Christian Nolting (lead strategist, Asia-Pacific region, Deutsche Bank Private Wealth Management) says that the case for developed-market sovereign bonds remains weak.

'Expected interest rate hikes by some central banks, the political uncertainty in Europe as well as the gradual end of bond-support programmes such as quantitative easing are probably not favourable to developed-market bonds,' says Nolting. He says he favours local bonds because of their more attractive yields and expected currency appreciation.

Otherwise, his call is for more vigilance in difficult conditions, keeping an eye on items such as commodity supply shocks and geopolitical events (read: Libya, Syria). 'Investors should not be complacent,' says Nolting.

Yonghao Pu (chief investment strategist, UBS Wealth Management Research) says rising short-term rates should put pressure on bond yields, and large public deficits in developed markets amplify the risk hanging over bond markets.

Like Calla of Standard Chartered, Pu recommends short- to medium-term maturities, and favours multilateral-agency bonds and high-quality corporate bonds over sovereign bonds.

'We see high-yield and emerging-market bonds as the most attractive bond segments,' says Pu, echoing the views of the rest of the panel. 'Although we expect the level of corporate debt to rise, companies are in very robust condition, which suggests little likelihood of defaults in the coming months.'

Pu recommends an Asian bond portfolio made mostly of investment-grade debt. He advises picking up high-yield bonds from strong issuers during price dips.