Sunday 31/05/2020

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[VIDEO] Peter De Coensel on fixed income investments: "Diversify & think globally"

CIO Fixed Income DPAM

Historic context:

  • Since 1981 until today we’ve witnessed an incredible bonds ‘bull market’ as a result of interest rate distortions.
  • Nonetheless when we look at the past 100 years the average 10 year US/EU bond rates fluctuate between 2-4%. The current ultra-low interest rate climate will thus take time to dismantle.
  • More than ever it is important to be patient, markets expect Fed interest rates to ‘normalize’ in 2 to 3 years. We need to follow-up on the ‘regime’ of low productivity growth, low inflation and low corporate investments. Only when this regime changes, policy rates might rise to 2/3% again.

Peter’s approach:

  • Smart diversification, risk control and flexibility are key ingredients for a successful bond strategy. Government bonds, corporate bonds need to be part of a healthy diversification that can only be constructed through diverse expertise (quant analysts, economists, fixed income specialist) which are very present within Bank Degroof Petercam Group.
  • As a result of this expertise we have become more positive on investment grade corporate bonds (Q2 2016) and since September 2016 on global inflation bonds. We went underweight on Eurozone government bonds where negative to zero interest rates are concurrent with economic conditions.
  • Also, the dollar appreciation has not come to end vs. the euro, the eurozone will have to externally devaluate further in order to balance the currency landscape.