I am Ihab Salib, Senior Portfolio Manager and Head of International Fixed Income at Federated Investors.
How have negative interest rates in many parts of Europe affected your investment ideas?
Well fixed income investment, as the name implies, traditionally is designed to provide the investors with a reliable stream of income in addition of the idea of some potential for capital appreciation. But with so many yields around the globe at zero or negative, there is no income, and the idea of capital appreciation is actually fairly limited. So consequently, we think a lot of the assets will go to parts of the world where you still have some yield. So places in Latin America for example, some places in Eastern Europe or Asia still offer you real yields that are positive.
Where are you finding global fixed income investment opportunities?
US growth is still strong and we try to look for opportunities globally that are linked to that growth. So there's a number of corporate bonds that look very attractive in South America and South Korea for example, or India. Another area that with tend to like is emerging market local bonds. Local yields are significantly higher than you have in the US and after the recent appreciation of the dollar, the valuation for many of those bonds look much more attractive.
Views are as of August 29, 2019 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Prices of emerging-market and frontier-market securities can be significantly more volatile than the prices of securities in developed countries, and currency risk and political risks are accentuated in emerging markets. Federated Investment Management Company 19-10119 (9/19)