Don’t overlook global bonds

By Sarah Cunningham-Scharf | December 23, 2014 | Last updated on December 23, 2014
1 min read

Interest rates have dropped across the globe, but you can still find attractive bond yields.

That’s because “global inflationary pressures remain low, and we’ve been able to establish that there’s [still] a pool of global capital seeking higher returns” through bonds, says Patrick Bradley, senior vice president of Investment Research at Brandywine Global Investment Management.

He says stimulus measures from both the European Central Bank and the Bank of Japan are likely, and that would provide liquidity for global markets. “[That would] mediate, to some extent, the liquidity squeeze concerns that have plagued markets.”

This has been an issue since, for several years, a large number of investors have focused on whether or not, and when, the U.S. Federal Reserve was going to cut down on its stimulus program called quantitative easing, or QE.

Now that QE’s ending, investors can look ahead to hints for economic improvement and rising rates.

Due to the strength of some bond markets, Bradley might maintain certain underweight currency positions in markets tied to the yen and euro, but “go long on currencies such as the Australian dollar.”

Sarah Cunningham-Scharf