Where are the biggest global bond opportunities?

FIXED INCOME

After a 30-year bull market in core government bonds, many investors are quite rightly questioning whether we have entered bubble territory, and what this means for fixed income allocations. The answer to the former part of the question is a straightforward ‘yes'.

The answer to the latter part and indeed when the fatal puncture will deflate the bond bubble is much less clear. In the meantime, investors are faced with a shrinking global opportunity set and are being forced to leave risk free assets and look much further afield for income sources, while in turn taking on extra risk. In light of the high valuations of G7 bonds, we anticipate lower overall returns within sovereign bond markets in 2013. Core government bonds are at all-time lows, yet the situation in Europe is far from resolved and further downgrades could occur as countries struggle t...