Skip to content
Suche

Global Policy Rates Stuck in Lockdown

Quentin S. Fitzsimmons, Portfolio Manager

How interest rates could remain at emergency levels for a sustained period.

Each month, our portfolio managers, analysts, and traders conduct an in-depth review of the full fixed income opportunity set. This article highlights a key theme discussed.

Key Insights

  • Central banks are likely to remain cautious for some time, keeping the short end of developed government bond curves anchored.
  • Longer-dated government bonds could face greater volatility as they become the preferred instrument to express duration views.
  • Volatility in long-dated government bonds is a risk for corporates.

Responding to one of the biggest economic shocks of the last 50 years, central banks and governments have pushed the boundaries of monetary and fiscal policy. The impact of this will be felt for some time in bond markets, even though the worst of the crisis appears to be behind us for now. During the latest policy meetings, the investment team discussed what the new fixed income environment will look like as the global economy slowly starts to rebuild.

Opening Quote Shackles have essentially been put on global policy rates. Closing Quote
Quentin Fitzsimmons, Portfolio Manager

Short‑Term Rates Likely to Remain Anchored

The global recovery may be underway, but hopes of a swift rebound from the downturn have all but disappeared. “While a typical recession usually lasts from four to six quarters, fully recovering from this deep slump is likely to be bumpy and more drawn out than most currently anticipate,” said Quentin Fitzsimmons, a portfolio manager and member of the global fixed income investment team. 

Given this, central banks are likely to err on the side of caution before they lift emergency interest rates or rein in monetary easing programs. “Central banks will do whatever it takes to maintain stability during this uncertain time,” Mr. Fitzsimmons said.

As usual, all eyes will firmly be on the Federal Reserve for direction. “It’s doubtful that the likes of the European Central Bank, Reserve Bank of Australia, or Bank of England will take any action toward normalizing interest rates before the Fed does,” said Mr. Fitzsimmons. “Central banks have a vested interest to see how the Fed navigates policy, and the indications so far suggest there will be no changes to U.S. interest rates for at least the next two years.”

This dovish rhetoric sends a strong message to bond markets. “Shackles have essentially been put on global policy rates,” Mr. Fitzsimmons said. “This will likely keep short-dated government bonds anchored for the foreseeable future.”

Countries where the short end of the curve offers modest positive roll‑down look attractive in an environment of prolonged low interest rates, the investment team noted. The bond markets of countries such as India, China, and South Korea stand out as still offering appealing opportunities on this front.

Opening Quote Yield curve control is, for the most part, a statement of intent by a central bank to look away from traditional monetary policy. Closing Quote
Quentin Fitzsimmons, Portfolio Manager

Longer‑Dated Bonds Expected to Exhibit Volatility

For long-dated government bonds, however, the performance pattern is likely to exhibit more volatility. Mr. Fitzsimmons said: “Even though global central banks are likely to remain on hold, the fiscal pressure is building as almost all governments launched large stimulus programs in response to the pandemic. This could drive massive issuance of longer‑maturity bonds, with potential knock-on effects for the supply and demand dynamics in this part of the curve. This could lead to short‑term price disruptions.”

Growing expectations that the Fed may introduce a policy of yield curve control, like Japan did in 2016, could also cause longer-dated bonds to become more volatile. In Japan’s experience, yield levels of specific short- and intermediate‑dated maturities were targeted, while longer-dated Japanese government bonds, such as 30-year bonds, were given more freedom to move. Australia also adopted a similar policy recently. “Yield curve control is, for the most part, a statement of intent by a central bank to look away from traditional monetary policy. It should not be viewed as an automatic stabilizer for long-dated bonds,” Mr. Fitzsimmons said.

Against this backdrop, 30-year bonds across a range of developed countries, including the U.S., UK, and Germany, could become more impacted by duration rebalancing going forward. That’s because we expect investors to start using longer-dated bonds as their instrument of choice to express absolute yield views and amend duration profiles in their fixed income portfolios.

Volatility in Long-Dated Government Bonds a Risk for Corporates

Corporate bonds could also be impacted by greater volatility in long‑dated government bonds. In the last two months, companies have rushed back to the primary bond market to raise new cash, with some opting to sell long-dated bonds to push out their refinancing needs.

While supply has been met by strong demand so far, there are risks involved with taking on more duration that might not have been fully understood by market participants. “Investing in long‑maturity corporate bonds carries risks,” Mr. Fitzsimmons said. “The moves in core government bonds at the end of May and in early June when curves steepened rapidly should serve as a reminder that the pricing of long‑dated corporate bonds is not only determined by credit spreads, but also by its interest rates duration component.”


Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

EEA ex-UK—Unless indicated otherwise this material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L-1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.

Switzerland—Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.

UK—This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

202006-1221443

Herunterladen

Zielpublikum des Dokuments: Anteilsklasse: Sprache des Dokuments:
Herunterladen Abbrechen

Herunterladen

Anteilsklasse: Sprache des Dokuments:
Herunterladen Abbrechen
Melden Sie sich an, um regelmäßige Updates zu Fonds, Marktkommentare und mehr zu erhalten.
Nach der Registrierung können Sie Fonds als Favoriten markieren, um regelmäßige Updates zu Fonds, Marktkommentare und mehr zu erhalten.

By clicking the Continue button, I acknowledge that I have read and accepted the Privacy Notice

Weiter Zurück

Angaben Ändern

If you need to change your email address please Uns kontaktieren.
Subscriptions
OK
You are ready to start subscribing.
Get started by going to our products or insights section to follow what you're interested in.

Produkte Einblicke

GIPS® Informationen

T. Rowe Price („TRP“) erklärt die Einhaltung der Global Investment Performance Standards (GIPS®). TRP wurde für einen Zeitraum von 21 Jahren bis zum 30. Juni 2017 von KPMG LLP unabhängig geprüft. Der Prüfbericht ist auf Anfrage erhältlich. Im Rahmen der Prüfung wird beurteilt, ob (1) das Unternehmen alle Anforderungen der GIPS-Standards an den Composite-Aufbau unternehmensweit erfüllt hat und ob (2) die Richtlinien und Verfahren des Unternehmens geeignet sind, die Performance gemäß den GIPS-Standards zu berechnen und darzustellen. Die Prüfung gewährleistet nicht die Richtigkeit einer bestimmten Composite-Darstellung.

TRP ist ein US-amerikanisches Anlageverwaltungsunternehmen mit verschiedenen Anlageberatern, die bei der US-amerikanischen Börsenaufsichtsbehörde (Securities and Exchange Commission), der britischen Finanzaufsichtsbehörde (Financial Conduct Authority) und anderen Aufsichtsbehörden in verschiedenen Ländern registriert sind, und gibt sich für GIPS-Zwecke gegenüber potenziellen Kunden als Unternehmen mit diesem Status aus. Darüber hinaus definiert sich TRP gemäß GIPS als diskretionärer Anlageverwalter, der vorwiegend institutionelle Kunden im Hinblick auf verschiedene Mandate betreut, darunter Anlagestrategien für die US-Märkte sowie internationale und globale Strategien; ausgeschlossen sind dabei jedoch die Leistungen der Private Asset Management Group.

Eine vollständige Liste und Beschreibung aller Composites des Unternehmens und/oder eine Präsentation gemäß den GIPS®-Standards sind auf Anfrage erhältlich. Weitere Informationen zu den Richtlinien und Verfahren des Unternehmens für die Berechnung und den Ausweis von Performancedaten sind auf Anfrage erhältlich

Sonstige Schriften

Ihr Abonnement / Ihre Zeichnung ist erfolgt.

Mich per Email informieren, wenn
regelmäßige Daten und Kommentare verfügbar sind.
Kommentar außer der Reihe verfügbar
neue Artikel sind verfügbar

Vielen Dank für Ihr anhaltendes Interesse.