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August did not stir financial markets as often had been the case in pre-COVID years. Instead, August confirmed the steady reflation visible across global financial markets since April. With 2/3 of the year behind us, we find comfort in the realized bond returns. However, return expectations across bond sectors have collapsed.
The European Union and the Eurozone surpassed a historic hurdle over the past week. The birth of a European safe bond is a reality. Investors should embrace this moment while coping with unseen challenges as global, quality, fixed income product yields are falling well below 1.00%. Credit investments carry and offer small risk premia.
As countries have started to relax confinement conditions, market participants are looking for recovery signs in consumption and business activity. One message: tail risks turn inwards, closing in towards the mean of expected outcomes within financial markets.
Peter De Coensel, CIO Fixed income, clarifies some misleading statements in global bond markets. He stresses selection of underlying bond strategies and the correct positioning across bond sectors as key factors in a low yield environment.
Interest rates on core government bonds across the European continent are at rock-bottom levels. The past month was characterized by a risk-off sentiment in bond markets, triggered by the Italian government formation and the market reaction to the impact on emerging markets of a rising dollar and specific situations in some EM countries (Turkey, Argentina).
Peter de Coensel, CIO Fixed Income, explains his view at the onset of a second quarter that will likely be fraught with volatility spikes, declining central bank support, fresh Trump tantrums and renewed uncertainty on the geopolitical front.