:Many of the world's big bond fund managers, from BlackRock to Vanguard, are optimistic that sovereign debt markets have turned a corner after a rout in 2022 with peak inflation and interest rates finally in sight.
"It's too early to call the end of potential pressure on interest rates but the extreme volatility is over and ... the bludgeoning of the financial system by the Fed is over," said Rick Rieder, chief investment officer of global fixed income at BlackRock, which manages $8 trillion worth of assets. "Trading was difficult in a sense that the market was not properly functioning. Futures are the most common tool for hedging but there was time when it didn’t work," said Tomohiro Mikajiri, Barclays' head of yen and non-yen fixed income trading, Japan.
"The big plague of negative yields has largely gone away, so not the historic bond bull market we saw at the start of the 1980s, but very attractive yields compared with the last period," said Andrew Balls, chief investment officer for fixed income at PIMCO, which manages $1.69 trillion.As bond yields stabilise at higher levels, many investors have increased their exposure.
"We're in an environment where you've gotten yields back to something that's more normalized versus artificially depressed," he said. Amundi, which manages 1.9 trillion euros of assets, expects a revival of the 60/40 stocks-bonds investment portfolio, following what some deemed its worst performance in a century as both bond and equity prices tanked. The split has been a key feature of investing for decades.But with bonds failing to provide safety in 2022, caution remains. Hefty debt supply just as central banks wind down trillions of dollars in bonds held on their balance sheets, means headwinds remain.
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