Market Update

Asia Fixed Income

A pleasant first half but challenges to come
Asian bond markets delivered better-than-expected performance in the first half of 2014 — a pleasant surprise for fixed income investors who expected US Federal Reserve (Fed) Quantitative Easing (QE) tapering and rate hike expectations in the US market to create challenging trading conditions. Instead, investors were rewarded with 5.0% return on local-currency Asian bonds and 5.9% return on hard-currency (i.e., US-dollar-denominated) Asian bonds. Read More

Emerging Markets Debt

A strong structural story lying behind the noise
A number of short-term distractions grabbed emerging market headlines over the past eighteen months, including talk of the Federal Reserve (Fed) winding down Quantitative Easing (QE) prompting a widespread sell-off across emerging markets, Chinese authorities’ attempts to rebalance their economy away from exports and towards more sustainable domestic consumer demand, and a number of geopolitical risks taking center stage around the globe. Read More

Global Fixed Income

Sticking with a lower duration bias
In the first half of 2014, global bond market performance aligned with a number of expectations we had going into the year. Both high-yield and investment grade corporate bonds performed well. Broadly speaking, emerging markets debt also did well in the first half, with currencies appreciating generally and economies including the Philippines and South Korea continuing to plug along with growth rates stronger than global averages. Read More

North American Fixed Income

First-half upside surprises; continued corporate debt opportunities in H2 
The US economy continues to strengthen after its dismal performance in the first quarter. Employment is improving, the housing market is in better shape with room to expand, and the oil and gas sectors continue their upswing. As a result, we expect interest rates will go up faster in the US than in Canada, given the former’s stronger economic footing. That being said, Canada tends to export more to the US when the US is strengthening to piggyback on its economic performance. In this context, we are expecting the US bond market to continue to underperform Canada slightly in 2014. Read More

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