Finding opportunities in bonds amid 'shift back to normality'

After several years of extraordinary central bank intervention intended to provide monetary stimulus to ailing global economies, we are finally transitioning from quantitative easing (QE) to quantitative exit.

The first material indication of this will, we believe, come this month with a formal announcement from the US Federal Reserve that it will taper QE-related reinvestments of maturing securities held on its balance sheet from the fourth quarter of this year.  In Europe, stronger-than-expected economic performance and receding risk of deflation - as well as the scarcity of eligible bonds for purchase - will likely prompt an announcement from the European Central Bank on a tapering of its own version of QE.  Managers warn unwinding European QE could burst 'the mother of all bubbles' I...