Notwithstanding this year’s sell-off, investors who have dived for the shelter of US government bonds since the beginning of this crisis must now consider what, if anything, to do next. Equity markets have bounced, and on Wednesday the 10-year Treasury yield hit 3 per cent. Should bond investors hold their nerve? Renewed risk taking or, worse, a pick-up in inflation could leave bond holders nursing losses as interest rates rise.

Unfortunately, popular valuation methodologies, such as a comparison of the respective yields on stocks and bonds, have little predictive power. Alternatively, one way for a cautious investor to consider their level of comfort is to assess the scope for potential losses for a given investment, based on reasonable assumptions.