LIVE MARKETS-Europe and Canada top fixed-income picks - Schroders

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EUROPE, CANADA TOP FIXED-INCOME PICKS - SCHRODERS

After September's global bond sell-off and euro zone spread widening, investors are asking where the best opportunities now lie.

Schroders’ preferred destinations are Canada and Europe.

“We expect at least one further hike in December, but believe the ECB is unlikely to deliver as much as the market currently discounts,” the asset manager said in a note before the ECB meeting, which left its guidance on euro zone interest rates unchanged.

A dovish shift in rate expectations would drive bond yields down and boost bond prices.

Schroders mentions “signs of stress in (the euro area) sovereign bond markets and clearer signs that monetary tightening is biting.”

“In Canada, domestic conditions remain benign: core inflation is more at risk of undershooting target than overshooting, while the labour market has softened.”

“The Bank of Canada has taken a more hawkish tone, but significant further tightening is already priced,” it argues.

The London-based asset manager remains neutral on US government bonds, arguing that “a Fed hiking cycle is well discounted, and yields that have moved above 5% on ten-year Treasuries provide attractive income.”

(Stefano Rebaudo)

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