{"id":55410,"date":"2016-09-05T01:23:54","date_gmt":"2016-09-04T23:23:54","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/fixed-income-the-risk-of-safety\/"},"modified":"2019-12-31T01:02:43","modified_gmt":"2019-12-31T00:02:43","slug":"fixed-income-the-risk-of-safety","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/fixed-income-the-risk-of-safety\/","title":{"rendered":"Fixed Income : The Risk of Safety"},"content":{"rendered":"<ul>\n<li> That\u2019s because even a modest pick-up in growth and<br \/>\ninflation could arguably push sovereign yields higher<br \/>\n\u2014 and prices lower. And that would have notable ripple<br \/>\neffects in portfolios heavily weighted toward sovereign<br \/>\nbonds \u2014 in particular the many passive strategies tied<br \/>\nto the Barclays U.S. Aggregate Bond Index.[[Note: The Barclays U.S. Aggregate Bond Index focuses on large, liquid, fixed-rate investment-grade issues, which have had historically low yields and longer-than-average duration in recent years.<br \/>\nThat means less income to offset the future impact of rising interest rates (interest rate risk) on bond prices. Treasuries and mortgage-backed securities represent a bigger share of index than before<br \/>\n2008 crisis. The index excludes approximately 65% of the investable fixed-income universe including inflation-linked, below-investment-grade, floating-rate and non-U.S. securities.]]<\/li>\n<\/ul>\n<ul>\n<li> But by the same token, higher-yielding sectors that have<br \/>\na low correlation to Treasuries could have the potential<br \/>\nfor further gains if and when growth picks up, and with<br \/>\nit, investor confidence. That includes not only investmentgrade<br \/>\ncredit and emerging markets sovereign debt, but<br \/>\nalso sectors with a negative correlation to Treasuries, i.e. that have historically moved up when Treasuries<br \/>\nmove down, including emerging market corporate debt,<br \/>\nU.S. high yield and bank loans.<\/li>\n<\/ul>\n<ul>\n<li> To be sure, data on the U.S. economy has yet to suggest<br \/>\na huge acceleration in growth. But everything\u2019s relative<br \/>\n\u2014 and the question is whether there might be enough<br \/>\nto be inconsistent with the level of pessimism still priced<br \/>\ninto Treasuries.<\/li>\n<\/ul>\n<ul>\n<li> Consider that core inflation in the U.S. has crept higher<br \/>\nto 2.3%[[2 Bloomberg, June 2016]], matching the highest level in four years \u2014 something that a data dependent Federal Reserve will<br \/>\ncertainly be paying close attention to as it debates the<br \/>\npace of interest rate normalization.<\/li>\n<\/ul>\n<ul>\n<li> All this underscores why it could make sense today<br \/>\nto look beyond traditional bond benchmarks and their<br \/>\nheavy tilt toward Treasuries \u2014 to more diversified active<br \/>\nstrategies, including unconstrained strategies with the<br \/>\nflexibility to incorporate higher-yielding sectors of the<br \/>\nbond market. <\/li>\n<\/ul>\n<p><a href=\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries.jpg\"><img loading=\"lazy\" class=\" aligncenter size-full wp-image-55408\" src=\"IMG\/jpg\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries.jpg\" alt=\"yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries.jpg\" align=\"center\" width=\"1100\" height=\"434\" \/><\/a><div id='gallery-1' class='gallery galleryid-55410 gallery-columns-3 gallery-size-herald-lay-c1'><figure class='gallery-item'>\n\t\t\t<div class='gallery-icon landscape'>\n\t\t\t\t<a class=\"herald-popup\" href='http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries.jpg'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-470x313.jpg\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-470x313.jpg 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-300x200.jpg 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-414x276.jpg 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-640x426.jpg 640w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-130x86.jpg 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/yields_and_correlations_of_select_fixed_income_sectors_to_u.s._treasuries-187x124.jpg 187w\" sizes=\"(max-width: 470px) 100vw, 470px\" \/><\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The near-record lows now prevailing for sovereign bond yields reflect persistent anxiety about the outlook for growth around the world. Yet the global economy continues to expand \u2014 and inflation remains muted in the world\u2019s largest economies. As a result, U.S. Treasuries \u2014 widely viewed as the ultimate safe haven \u2014 could entail greater embedded risks than many realize&#8230;<\/p>\n","protected":false},"author":1,"featured_media":55408,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1655,1856,1859,1681,1651,1437,1807,2054],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55410"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=55410"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55410\/revisions"}],"predecessor-version":[{"id":55411,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55410\/revisions\/55411"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/55408"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=55410"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=55410"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=55410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}