With interest rates at records lows, and even negative in some cases, advisers could still find some yield and diversification if they look outside traditional sovereign bonds.
At the time of writing, developed market bonds were at record lows such as Australian 10-year government bonds at 1.01%, US 10-year bonds at 1.69%, and German 10-year bunds at -0.46%.
In August, US two and 10-year Treasury yields inverted for the first time in over a decade, signalling a looming recession, and indicating bond yields would not increase anytime soon.
However, according to Bank of America Merrill Lynch’s latest data, bonds globally had US$11.1 billion ($16.4 billion) in inflows over the year to September, 2019.
Fidelity’s latest investment outlook said the ongoing trade war between the US and China, and weak economic data, had spurred investors to seek out safe havens such as government bonds and gold.
Other macro events like Brexit had caused Gilt yields to rise and beyond that the UK could be set to plunge into a technical recession, while the European Central Bank’s announcement of a new round of quantitative easing would widen spreads between semi-core countries and Germany, Fidelity said.
JP Morgan Asset Management’s chief investment officer of the global fixed income, currency and commodities group, Bob Michele, said the biggest problems in terms of finding yield were in Japan and Europe as central banks were concerned...