Sep 14 2011 |
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Global bond markets yielded solid returns last year
Wednesday, Sep 14, 2011
Gulf News
Abu Dhabi Global bond markets generated solid returns during 2010 as investors sought the relative safety of these assets based on concerns about perceived risks to the global economic recovery, the Abu Dhabi Investment Authority ( Adia ) said yesterday.
In its latest annual review, Adia said: “After holding roughly steady until April, 10-year government bond yields declined by around one full percentage point in the US, Germany, and the UK, and half a percentage point in Japan by the third quarter.
Yields reversed much of their decline in the fourth quarter, but still remained at historically low levels — around 3.5 per cent for 10-year government bonds in the US, 3.0 per cent in Germany and 1.25 per cent in Japan.”
It said the strong ecoomic rebound that began in late 2009 had boosted confidence that the recovery was on a sound footing, and markets began to anticipate that unusually low central bank interest rates would be increased by the end of 2010.
“By the second quarter, however, sluggish econ-omic data ignited fears of renewed recession and pushed back the expected timetable of higher official interest rates.
Rebound
During the fourth quarter, yields in the major government markets rebounded on a combination of better economic data and expectations that expansionary US policies would sustain growth in 2011,” Adia said in the review.
It said most other sectors of the bond market — inflation-indexed bonds and credit — lagged government bonds but still registered solid absolute gains.
“The prominent exception was government debt in certain euro-area countries beset by market concerns over swelling public liabilities.
Value of allocation
“The performance of major government bond markets in 2010 once again demonstrated the value of an allocation to this asset class and its ability to diversify a portfolio even in a climate of low yields. “Nonetheless, yields at the end of 2010 were close to the minimum levels that we believe are sustainable over the longer term, given the probability of higher economic growth or inflation in the future, and the pressures of large public sector debt,” it added.
Gulf News Archive
Shaikh Hamed Bin Zayed Al Nahyan
By the second quarter, however, sluggish economic data ignited fears of renewed recession and pushed back the expected timetable of higher official interest rates.”
Adia annual review report
By Himendra Mohan Kumar?Staff Reporter
© Gulf News 2011. All rights reserved.
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