Interest rates have dropped across the globe, but investors 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.
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Bradley, whose firm manages the Renaissance Global Bond Fund, adds, “There’s going to be balance sheet expansion coming from both the European Central Bank and the Bank of Japan, and we believe that that’s going to provide liquidity for global markets.”
That will help clients since it’ll “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 QE.
Now that QE is ending, however, investors can look ahead to hints about 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.”