Investors frequently focus on the yield to maturity that bonds pay, rather than recognizing the potential total returns that are available to global fixed income investors.
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Investors frequently focus on the yield to maturity that bonds pay, rather than recognizing the potential total returns that are available to global fixed income investors.
Comments Off on There’s more to a bond than its yieldLast week, the European Central Bank (ECB) decided to take a significant step away from normalization and toward more accommodation. It cut the deposit facility rate by 0.1% to a level of -0.5% (the first time the deposit rate has changed since 2016) and announced a re-ignition of quantitative easing (QE).1
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The yield curve has been a constant topic of conversation among investors since mid-August, when the 2-year/10-year Treasury curve briefly inverted and launched furious speculation that a recession may be around the corner. The same holds true among Invesco’s market strategists, who have been debating what an inverted yield curve means and whether a recession is indeed inevitable.
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This week, we are going to take a deeper dive into the issues currently facing the U.S., Europe, and China. Guiding us through this “regional roundup” are three of Invesco’s Global Market Strategists who are on the ground in New York, London and Hong Kong. While the details differ in each region, the biggest commonality they report is the heavy shadow of uncertainty that continues to linger over markets.
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August is supposed to be a slow, relaxing month – but this August was anything but that for investors. Trade frictions were on the rise for much of the month. The U.S. Treasury yield curve inverted several times, causing jitters for investors concerned that a U.S. recession is imminent. Of course, stock volatility rose, with the CBOE Volatility Index (VIX) hitting its highest level of 2019 in the month of August.1 Instead of enjoying calm, sunny days, markets were rocked last month by interviews with Federal Open Market Committee (FOMC) members at Jackson Hole, tweets from President Donald Trump, and geopolitical events in the U.K., Italy and India – to name just a few.
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As we embarked on this year, I expected 2019 to be the year of slower growth but better policy. And that, I posited, would be better for financial markets than 2018’s combination of strong growth and bad policy, specifically Federal Reserve (Fed) interest rate hikes and trade tariffs.
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