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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Bond-Market-Monthly-turn-that-frown-upside-down

Perspectives

Bond Market Monthly: turn that frown upside down

Kris Xippolitos

By Kris Xippolitos

Head - Fixed Income Strategy

September 20, 2019Posted InFixed Income and Investment Strategy

The growth in negative yielding bonds has changed the global fixed income landscape. Thanks to persistent negative interest policies in Europe and Japan, over 50% of the global bond market (ex-USD) now trades with yields below zero. Though part of the recent rally can be blamed on seasonal illiquidity, market uncertainties around growth and trade have also raised concerns.

Global central bank policy is expected to stay accommodative, as the European Central Bank (ECB) and US Fed cuts policy rates. The newly announced restart of the ECB’s asset purchase program will also add technical support to already low yields. We favor adding duration exposures, despite flat yield curves, preferably in US investment grade corporates and municipal bonds.

Though we are underweight low/negative yielding bonds in our global asset allocation, certain strategies can “turn that frown upside down". With US rate differentials versus non-US markets wide, the cost to hedge US dollar exposure has become expensive. Conversely, hedging some currencies back to USD has cheapened. Using derivative strategies, investors can hedge currency exposures back into USD and potentially generate positive carry. Based on suitability and risk tolerance, these strategies can produce higher yields than what is found in the US bond market.

In this edition, we also discuss the richness on the short-end of the US municipal bond curve, and how the duration of the market has reached historically low levels. We share detailed thoughts on the US high yield bank loan space, while reminding investors that the volatility in Argentina does not paint a wide brush across the emerging markets. Finally, we touch on the US preferred market, where remarkable YTD performance leaves valuations less attractive.

Read the September issue of Bond Market Monthly