Mark Preskett: Global fixed income markets are not happy hunting grounds for investors right now. Asset purchase programmes and interest rate cuts by central banks have helped push the yield to maturity of the Citi World Government Bond index down to a paltry 0.65%.
Negative yielding bonds now account for one quarter of the index, divided roughly equally between Europe and Japan. And more than 70% of global government bonds yield below 1%.
Corporate bond markets are also offering rather unappealing yield to maturities. In Europe, the yield to maturity is below 1%, and in the UK it is below 2.3%.
There are pockets of value, however, albeit at the riskier end of the credit spectrum. We see emerging market local currency debt, that is emerging market debt denominated in the currency of issue, as offering the best value within fixed income right now. The current yield to maturity of 6.2% is only slightly below our fair value yield of 6.8%.
Other areas of interest are the US high yield and emerging market hard currency debt markets.
