1. Newsroom
  2. The current search for yield is working in favour of emerging bond markets
Menu
UBP in the press 23.11.2016

The current search for yield is working in favour of emerging bond markets

The current search for yield is working in favour of emerging bond markets

institutional-money.com - Bond yields in developed countries are still under serious downward pressure, and so emerging debt is once again an attractive diversification option.


Emerging economies have suffered in recent years but have now entered a phase of greater long-term stability, and their bonds are already pricing in the main risk factors.

We can expect developed-country bond yields to continue falling. Renewed economic and political uncertainty is prompting the main central banks to keep rates under pressure. In the eurozone, the ECB is maintaining high levels of liquidity through its asset purchase programme, which is continuing to push down bond yields to the extent that the sovereign German 10-year yields are now negative. Similarly, the current level of US Treasury yields no longer reflects the country's economic situation, which is now showing a degree of inflation and fairly consistent growth.

"Dwindling yields in developed markets mean that alternatives are needed more than ever. Given today's circumstances, investment flows are starting to shift back to emerging-market debt, which is becoming more attractive after several quarters of uncertainty," according to Denis Girault, Head of Emerging Markets Fixed Income at UBP. From the macroeconomic point of view, emerging markets have entered a phase of greater long-term stability, with many countries balancing their current accounts in the last few months. Another positive factor is that commodity prices have stabilised. "These trends are helpful for emerging bond markets. Although the asset class has already rallied in the last few months, we still see scope for spreads to narrow, and therefore for prices to rise," he adds.

Selective investment approach

Although risk has recently shifted towards Europe, there are still some concerns regarding emerging markets. The main risk relates to weak solvency levels in the Chinese banking sector. "Unexpected newsflow from China could cause stress in the market. However, we believe that most of the risks have already been identified and priced into emerging-market bonds." Investment managers can mitigate risk in several ways, such as diversifying positions globally and taking a selective investment approach. UBP's team uses an active, unconstrained "bond-picking" strategy. "We analyse and select securities, issuer by issuer, based on their fundamentals and valuation," says Denis Girault.

Read the original article


GIRAULT Denis.jpg

Denis Girault
Head of Fixed Income

 

Newsletter

Sign up to receive UBP’s latest news & investment insights directly in your inbox

Click and enter your email address to subscribe

Responsible Investment

Value creation through responsible investment

Learn more about our Responsible Investment expertise

Watch the video

Most read

Press Releases 05.06.2018

New strategy on UBP's alternative UCITS platform

UBP SA is launching a new equity arbitrage strategy on its alternative UCITS platform in partnership with London-based alternative investment manager Cheyne Capital Management (UK) LLP (“Cheyne Capital”). This is the fourth addition to UBP’s alternative UCITS platform, which now has close to CHF 700 million in assets under management.

Press Releases 31.05.2018

UBP to acquire Banque Carnegie Luxembourg

Union Bancaire Privée, UBP SA (UBP) and Carnegie Investment Bank AB (publ) have announced today that they have entered into an agreement whereby Union Bancaire Privée (Europe) S.A. will acquire Banque Carnegie Luxembourg S.A. (BCL). The transaction is subject to the approval of the relevant regulatory bodies, and is expected to complete during the fourth quarter of 2018.

Press Releases 28.02.2018

ESG capabilities: launch of new emerging markets fixed income strategy

UBP has announced a new addition to its emerging market fixed income product range with the launch of a new offering which reflects a strengthening in UBP’s approach to responsible investing and a commitment to further developing its environmental, social and governance (ESG) capabilities.

Further reading

Press Releases 05.06.2018

New strategy on UBP's alternative UCITS platform

UBP SA is launching a new equity arbitrage strategy on its alternative UCITS platform in partnership with London-based alternative investment manager Cheyne Capital Management (UK) LLP (“Cheyne Capital”). This is the fourth addition to UBP’s alternative UCITS platform, which now has close to CHF 700 million in assets under management.

Press Releases 31.05.2018

UBP to acquire Banque Carnegie Luxembourg

Union Bancaire Privée, UBP SA (UBP) and Carnegie Investment Bank AB (publ) have announced today that they have entered into an agreement whereby Union Bancaire Privée (Europe) S.A. will acquire Banque Carnegie Luxembourg S.A. (BCL). The transaction is subject to the approval of the relevant regulatory bodies, and is expected to complete during the fourth quarter of 2018.

Press Releases 28.02.2018

ESG capabilities: launch of new emerging markets fixed income strategy

UBP has announced a new addition to its emerging market fixed income product range with the launch of a new offering which reflects a strengthening in UBP’s approach to responsible investing and a commitment to further developing its environmental, social and governance (ESG) capabilities.