Why relying on 'pre-2012 correlations' for diversification is putting bond portfolios at risk

clock

Investors cannot afford to ignore the increasingly positive correlation between core government bonds and credit markets as rate rises loom, says Jon Jonsson, senior portfolio manager, global fixed income at Neuberger Berman.

Back in 2011, as the eurozone crisis raged, European credit spreads widened and the 10-year German Bund yield plummeted by nearly 200 basis points over the summer. As risk appetite evaporated, capital rushed to perceived safe havens. Fixed income investors could be grateful that their core government bond exposures had cushioned the worst corporate bond losses, and many waited to rebalance. But then things changed. There was a brief resumption of ‘normal' negative correlation during the summer of 2012, when Greece was struggling to form a government. But then the European Central Bank pr...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Global

Global fund managers most bullish in two years as growth expectations improve

Global fund managers most bullish in two years as growth expectations improve

BofA Global Fund Manager survey

Cristian Angeloni
clock 13 February 2024 • 2 min read
 Stories of the week: 3 November

Stories of the week: 3 November

Odey Asset Management; BoE; Fed; - The biggest stories from the world of investment and asset management this week

Sarka Halas
clock 03 November 2023 • 1 min read
Opportunity abounds as India gains entry to JP Morgan's bond index

Opportunity abounds as India gains entry to JP Morgan's bond index

'Significant foreign investor inflows’

Investment Week
clock 10 October 2023 • 6 min read
Trustpilot