Understand emerging markets opportunities and the American Century advantage.
By Rich Taylor & Joyce Huang, CFA - December 2018
Flight to quality lifts Treasuries. Throughout the fourth quarter, severe volatility gripped the equity markets, sending investors into perceived safe-haven investments. This flight to quality drove yields lower across the Treasury yield curve, particularly in December, and U.S. Treasuries rallied for the month and the fourth quarter.
Longer-duration outperforms. The 10-year Treasury yield ended December at 2.69%, down 30 bps from the end of November and 38 bps from the end of September. The Fed raised short-term interest rates in December, but the two-year Treasury yield still fell 30 bps in in the month to 2.49%. In terms of total return, longer-duration securities outperformed shorter-duration bonds.
Growth, earnings outlooks weigh on corporates. Falling yields aided investment-grade corporate bonds in December, but worries about future economic and corporate earnings growth weighed on fourth-quarter returns. Meanwhile, high-yield corporates struggled in the risk-off climate.
Global yields slide. Slowing global growth and Brexit uncertainty helped pushed non-U.S. developed market yields lower, driving global bond returns higher for the one- and three-month periods. Declining yields and a slightly weaker dollar in the U.S. helped support gains among emerging markets (EM) bonds in December. For the quarter, returns were mixed on slowing global growth, country-specific events, and modest U.S. dollar gains.
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.
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