The following is an excerpt from Lilian Karunungan | January 15, 2017 | Bloomberg.com |
Don’t count your nails yet for the bond market’s coffin.
That’s the message from a JPMorgan Asset Management fund that’s outperformed in the past year by keeping to shorter-maturity securities. The $2.4 billion Global Bond Opportunities Fund has reduced its average duration in U.S. securities to three years from more than five in July, and has jumped into the domestic debt of Brazil and Russia, two higher-yielding emerging markets that have avoided the recent exchange-rate depreciation afflicting Turkey and Mexico.
“There’s still life in fixed income -- but it’s a question of what sort of fixed income we invest in,” said Iain Stealey, a London-based managing director who helps oversee $1.77 trillion globally at the firm. “Over the course of this year, we do feel we’re going to see higher core government rates whether it’s the U.S. or Europe," he said in an interview in Singapore last week.
Bond investors have been navigating dangerous shoals since the global-reflation trades that caught fire after the November U.S. presidential election victory for a fiscal-stimulus pledging Donald Trump. While the growth enthusiasm has ebbed in recent weeks, some are warning of the potential for more pain this year.
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