Bonds have underperformed over the last few years—and 2015 won’t be any different.
So says Luc de la Durantaye, managing director of asset allocation and currency management at CIBC Asset Management. He manages the Renaissance Optimal Inflation Opportunities Portfolio.
That’s the case, he adds, due to continued intervention by central banks across the globe, such as the Bank of Canada, Bank of Japan and European Central Bank.
In particular, says de la Durantaye, the ECB’s recent introduction of quantitative easing will create buying power in the fixed-income market and put downward pressure on bond yields. On the upside, he notes, that pressure could be offset by the ongoing global economic recovery and the possibility of rising interest rates.
Still, de le Durantaye’s forecast for bond yields isn’t optimistic. “The consensus expects interest rates—both the 10-year yield in Canada and in the U.S.—to [be] lower than 3%. And then we’re much lower than that: we’re expecting 2.25% for 10-year fixed income in Canada, and 2.5% for fixed income in the U.S.”
So investors will continue to search for yield in 2015, especially “given the low starting yield[s] they have to face.”