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

Expertise

Impact investing, il futuro comincia oggi

L’impact investing ha il compito di impegnarsi per risolvere i più pressanti problemi globali identificando interessanti investimenti a lungo termine.
Continua

Le news più lette

UBP in the press 26.09.2018

Asset TV Fund Selector: Fixed Income

What does the end of quantitative easing mean for bond investors? What should be the right exposure to emerging bond markets and why are active managers better equipped than passive ones to handle the return of volatility? Mohammed Kazmi, Portfolio Manager & Macro-Strategist Global and Absolute Return Fixed Income at UBP, recently participated in an Asset TV broadcast outlining the risk and reward trade-offs in fixed-income markets over the next six to twelve months.

UBP in the press 28.09.2018

AI will benefit Swiss banks

Bilan (25.09.2018) - “If I had to bet on which would be the leading professions in the years to come, Swiss bankers would be on the list!” This prediction by Laurent Alexandre, the founder of the Doctissimo.fr website, may come as a surprise to some.

UBP in the press 02.10.2018

Asset managers can help institutional clients deal with their challenges

Indices (01.10.2018) - Asset managers’ institutional clients, whatever their profile – insurance companies, pension funds, proprietary desks, sovereign funds or family offices – are all now faced with an unprecedented number of challenges.


Altro da leggere

UBP in the press 02.10.2018

Asset managers can help institutional clients deal with their challenges

Indices (01.10.2018) - Asset managers’ institutional clients, whatever their profile – insurance companies, pension funds, proprietary desks, sovereign funds or family offices – are all now faced with an unprecedented number of challenges.

UBP in the press 28.09.2018

AI will benefit Swiss banks

Bilan (25.09.2018) - “If I had to bet on which would be the leading professions in the years to come, Swiss bankers would be on the list!” This prediction by Laurent Alexandre, the founder of the Doctissimo.fr website, may come as a surprise to some.

UBP in the press 26.09.2018

Asset TV Fund Selector: Fixed Income

What does the end of quantitative easing mean for bond investors? What should be the right exposure to emerging bond markets and why are active managers better equipped than passive ones to handle the return of volatility? Mohammed Kazmi, Portfolio Manager & Macro-Strategist Global and Absolute Return Fixed Income at UBP, recently participated in an Asset TV broadcast outlining the risk and reward trade-offs in fixed-income markets over the next six to twelve months.