Bond blues remain

Bond blues remain

AUCKLAND, January 25, 2011¬¬– New Zealand investment managers are concerned the United States Federal Reserve’s expansionary monetary policies will have a significant negative impact on the return of global bond portfolios.

Russell Investments’ latest New Zealand Investment Manager Outlook (IMO) survey shows 70% of the managers expect the impact will be felt in the next 12 months.

Daniel Mussett, the head of consulting for Russell Investments in New Zealand, says that while the managers recognise the market had already anticipated that impact, they are concerned the Fed’s policy is pushing bond yields higher to the detriment of bond investors.

“A key consideration for investors is whether the Fed’s programme will be expanded further,” Mr Mussett says. “Investors should note US Fed Chairman Ben Bernanke’s comments at the end of last year that additional (quantitative easing) programmes are certainly possible depending on how the US economy looks.”

The survey, completed toward the end of December, found managers who responded were all bullish on international and domestic equities. This is a view is shared by their counterparts around the world, who see that equities offer significant opportunities.

The one caveat on securities, however, was that the local managers saw the New Zealand market as having moved from being undervalued to now being either fairly valued or overvalued.

“And yet the downside for New Zealand equities appears limited, with corporate balance sheets in a healthy position,” Mr Mussett says. “One manager noted ‘the era of negative earnings revisions has faded’.”

ENDS

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