Pressured by structural forces over the past decade, global bond markets have been approaching low, zero, or negative yields, and their safe-haven utility inside portfolios also has steadily diminished. Bond investors seeking both yields and safe-haven protection are discovering an alternative in China’s sovereign bond market.
An allocation to global bonds can produce superior returns and provide diverse sources of alpha. Active global bond investors have an intrinsic advantage due to an expanded opportunity set. Investors who focus on government bonds in a single country are limited largely to binary duration decisions, while global managers capture much more complex relationships. By allowing managers to invest globally, investors diversify their source of return and, in our view, allow greater potential for outperformance.
The pandemic may have put the global economy into unknown territory, but tailwinds to growth are gathering. In his third quarter review, Francis Scotland explains how the accumulation of rate cuts, the lagged influence of falling bond yields, increases in household net worth, and cheap energy imply a gradual rise in bond yields and steepening of the curve.
Francis Scotland recaps the year to date and looks at the big macroeconomic issues that will affect the evolution of the business and liquidity cycles over the next one to three years.
The writing has been on the wall for a South Africa credit rating downgrade for quite some time, as Moody’s continually deferred its country review. South Africa was unofficially given a grace period by the ratings agency to allow current President Cyril Ramaphosa to tackle deeply entrenched structural problems: rampant corruption, a nearly 30% unemployment rate, and fiscally bloated state-owned enterprises (SOEs) such as Eskom. Weakness in commodity markets only compounded issues for South Africa. In order to maintain its own credibility, and address the negative impact deteriorating global growth could have on South Africa, Moody’s relegated the country’s credit rating to below investment grade on March 27—a decision that fell in line with existing ratings from S&P and Fitch. Moody’s also continued to maintain a negative outlook for the country. Yet, in the first two days of trading after the downgrade announcement, South African 30-year government bonds have rallied substantially
In our most recent global macroeconomic update, we discuss the factors affecting financial markets and share our outlook for global fixed income and currencies.
In our most recent global macroeconomic update, we discuss the factors affecting financial markets and share our outlook for global fixed income and currencies.
In this segment on Bloomberg Radio, Global Fixed Income Portfolio Manager Jack McIntyre covers a range of topics, from why we are watching all things China to why we have Brexit fatigue.
The outlook for Brazil currently is clouded by several issues, but greater clarity is expected in the coming months. The country recently emerged from a crippling truckers’ strike only to face new economic challenges from rising oil prices and the U.S. dollar. Political uncertainty is expected to subside following the upcoming general election, allowing the focus to shift to much needed pension reforms.
Economic Surprise Indexes have fallen for most of 2018; the biggest disappointment coming from Europe.
3.
02:28
The Global PMI composite output measure has rebounded while the Global PMI for manufacturing activity is still declining.
4.
02:54
One OECD Leading Economic Indicator for OECD economies and the 6 major NME's has turned higher; the other is stabilizing.
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03:05
The OECD LEI for China has turned decisively higher this year after declining most of last year.
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03:37
European GDP growth likely will stabilize somewhere slightly below 2% based on the trend in money growth.
7.
03:58
Growth in the aggregate balance sheet of the world's major central banks is slowing but still positive.
8.
04:17
The Fed Funds rate is already close to central bank's estimates of the "neutral" rate. It will be mindful of raising rates and shrinking the balance sheet from here forward.
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04:54
China has ended the regulatory review which weighed on infrastructure spending. The focus has shifted to stabilizing the economy.
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06:41
The Global PMI for manufacturing new export orders is beginning to bottom out.
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08:09
Second quarter turbulence drove risk premiums in some EM fixed income markets to recession levels.
We have firmly believed that growth would pick up outside the U.S. As that growth differential changes, Steve Smith explains where the U.S. is in the business cycle in our final segment of the synchronized global growth series.
In the next installment of his series on global economic growth, Steve Smith points to several key data points that make the world economy look "picture perfect."
As we grow closer to the second half of 2018, Portfolio Manager Jack McIntyre explains why we remain constructive on local-currency emerging market debt. In this short video, he outlines the asset class’s four pillars of support as well as three risk factors.
