Understand emerging markets opportunities and the American Century advantage.
By Rich Taylor & Joyce Huang, CFA - November 2018
Treasury yields retreat. Once again, U.S. Treasury yields spiked early in the month—this time in response to midterm election results—before heading downward. Signs of moderating economic growth, along with softer rate-hike language from the Fed, pushed yields lower across the curve. In addition, continued stock market volatility triggered some safe-haven buying, which benefited the broad Treasury sector.
Longer-duration securities rally. The10-year Treasury yield ended the month at 2.99%, down 15 bps from the end of October. The two-year Treasury yield fell 8 bps to 2.79%, and the yield curve flattened. In terms of total return, longer-duration securities outperformed shorter-duration bonds.
Corporate bonds decline; munis outperform. Worries about the economic outlook and future corporate earnings growth continued to weigh on corporate bonds, which declined modestly. High-yield corporates also struggled, largely due to equity market volatility and falling oil prices. Elsewhere, positive year-end supply/demand dynamics helped munis outperform Treasuries.
Global yields edge lower. A slowing global growth outlook and uncertainty regarding a Brexit deal generally drove non-U.S. developed market yields lower. Falling U.S. interest rates and a more-dovish Fed helped slow the sell-off among external emerging markets (EM) bonds. These factors, along with a moderating U.S. dollar and better-than-expected economic growth in South Africa, helped trigger a rally among local emerging markets bonds.
Notes from the Global Fixed Income Desk
Monthly analysis of the global bond market.
Abdelak Adjriou, discusses his view on the current investment environment and the benefits of allocating into emerging market debt.
In this highlights clip of a recent Asset TV Institutional Masterclass panel, Abdelak Adjriou discusses mispriced risks, increasing oil prices, central bank normalisation, and total return approaches in emerging markets debt.
We believe the reappearance of volatility may constrain performance for investors using a traditional benchmark approach to emerging markets debt investing.
After a reprieve in July, volatility has returned to emerging markets assets, thanks mostly to tumult in Turkey.
August 14, 2018
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC USE