Skip to Content
US Videos

Bonds Get Another Boost

The ECB's QE program and soft economic data have driven fixed-income returns, while miserly yields on sovereign debt make U.S. corporates more attractive to global investors.

Declining interest rates across the world have driven strong returns among fixed-income securities in the first quarter. The ECB began its long-awaited QE program in early March, and this has helped to push bond prices up so high that yields have not only reached new all-time lows in the eurozone but, in some cases, have driven interest rates into negative territory. Considering that interest rates on sovereign bonds in developed markets are near their historically lowest levels, we think that corporate bonds should outperform on a relative basis.

In the first quarter of 2015, fixed-income returns were predominately driven by declining interest rates. On the shorter end of the curve, interest rates tightened as commentary from the [Federal Open Market Committee's] statement along with weakening economic indicators are prompting investors to bet that the Fed will keep interest rates lower for longer.