Powered by MOMENTUM MEDIA

Emerging market bonds offer more value: Brandywine

By Killian Plastow
 — 1 minute read

Fixed-income investors have flocked to ‘safe-haven’ bond markets in the wake of the Brexit referendum, but Brandywine Global cautions that these markets may not offer good value for their level of risk.

Speaking to InvestorDaily, Brandywine’s co-director of global macro research and portfolio manager of global macro strategy, Francis Scotland, said many of the so-called safe havens (bonds, gilts, treasuries and similar) still had significant exposure to risk.

“The whole idea of bonds in the developed countries being safe havens seems like a bit of an oxymoron. It seems to us that’s where the risk of a capital loss is greatest – you could easily have a 50 to 75 basis point retrenchment in safe-haven bond yields,” he warned.

Advertisement
Advertisement

Mr Scotland said the “enormous rally” seen in these markets had resulted in prices becoming “incredibly expensive” when compared with emerging market bonds.

“Given how low yields are, and given this propensity for world policy makers to really try to make an effort to get things moving again, we suggest the rewards/risks [are] tilted against bond prices in the developed countries,” he said.

Emerging market bonds offer more value, Mr Scotland said, noting that an improvement in economic growth would further add to their relative value.

“A better global growth outlook could actually be favourable to some of the markets that people don’t really like in the emerging world,” he said.

Mr Scotland said Australian bonds still offer value, noting that they are “a reasonable investment for the time being”.

“They’re one of the higher yielding bonds in the safe-haven bucket, so to some extent there’s relative value there,” he said.

 

Read more:

ASIC proposes new risk management guidance

Cost of delayed reform in the billions

Industry super funds outperform bank funds

Asian emerging markets increasingly vulnerable to external risk

Satisfaction with banks reaches three-year low: Roy Morgan


The must-attend event for financial advisers is back in 2022: the ESG Summit, coming to Sydney and Melbourne in February. Walk away with vital knowledge on a number of key ESG areas to help you make informed ESG strategy decisions and to better communicate and integrate the growing ESG space to clients. Visit the website to secure your place.

 

Emerging market bonds offer more value: Brandywine
investordaily image
ID logo

 

related articles

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.