The best government bond markets may be outside the United States.
George Boley of Allspring Global Investments steers clients to countries where central banks are raising interest rates or where inflation trends are different.
“Bond markets everywhere are rushing to price in inflation,” he told CNBC’s “ETF Edge” this week. “We’re seeing central bank expectations rise significantly in places like the UK, certainly across Europe, and even in places like Australia.” “Some of that is already happening. The ECB just raised interest rates a few weeks ago. There is an expectation that it will take a few more steps. But unless the Fed examines these moves, it will probably have to implement policy at a slower pace than is priced in.”
Boley works as chief investment strategist in the fixed income division at Allspring, an asset management firm primarily focused on fixed income, money markets and equities. According to Allspring’s website, its customers range from consultants and financial advisors to corporations and financial institutions.
“Short to Medium Duration World Government Development Market Bonds” [are] “It’s not a bad situation, especially for central banks, which are very dependent on inflation,” he said. “If they act aggressively, that will help bond investors.” So we’re going to add that international period and mix it in with the US period. I’m currently experimenting with different rate cycles and it’s working very well. ”
The Fed has not raised interest rates in the US since July 2023. As of late Friday, CME Group’s FedWatch gauge showed a 78% chance the Fed would raise rates in December. By January 2027, the odds had dropped to 68%.
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Meanwhile, Boly highlighted the European Central Bank’s actions earlier this month. On June 11, the ECB raised its policy interest rate by 25 basis points to 2.25%. This will be the first rate hike since September 2023.
Steve Raipley, global co-head of BlackRock’s iShares fixed income ETF, also believes there are benefits for investors expanding overseas. He points to bonds issued in Europe, which have lower risk and higher yields.
“Many of our customers, many fixed income investors, [are] It’s very US-centric,” Boley added. “The outside world is big. The global bond market is huge, and diversifying both duration, credit risk, and even security selection can have a positive impact on your portfolio.”
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