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As Negative‑Yielding Bonds Set New Records, Flexible Investing May Offer Benefits

Published Thu, 20 Jun 2019 02:52:24 -0400 on Seeking Alpha

Negative yields on bonds are back with a vengeance. The five-year German government bond yield reached an all-time low of ‑0.69% after European Central Bank (ECB) President Mario Draghi delivered a dovish speech on June 18, indicating that the ECB could provide additional stimulus if economic downside risks increase and the current inflation outlook remains subdued. This triggered a fall in bond yields globally, with a record of more than US$12 trillion of bonds trading at negative interest rates as of June 19 (see chart). Negative yields mean investors have to pay (rather than being paid) for owning these bonds.
While investors might be satisfied with positive returns from falling yields in the rearview mirror, the picture is quite different when looking ahead. Negative yields represent a significant challenge for investors in traditional benchmark-oriented strategies. The yield on five-year German bonds, for instance, would reduce invested capital by 0.69% each year, or approximately 3.45% over five years. With these negative yields embedded in the respective benchmark-oriented strategies, we believe investors should be exploring alternatives.
Lower compensation per unit of risk In addition to falling rates, benchmark-oriented investors may be exposed to higher market risk, which is reflected in increased interest rate duration for traditional strategies. Duration measures a bond's price sensitivity to changes in interest rates, and the duration of the Bloomberg Barclays... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
STONE HARBOR EMERG MARKET FUND 13.46   0.0 0.00 0.00 16.01
ABERDEEN ASIA-PACIFIC INCOME FUND 4.20   0.0 0.00 0.38 9.11
MORGAN STANLEY EMERGING MARKETS DOM DEBT FUND 6.69   0.0 0.00 0.00 9.01
WESTERN ASSET EMERGING MARKETS INCOME FUND 13.97   0.0 0.00 0.00 8.58
TEMPLETON EMERGING MARKETS INCOME FUND 9.22   0.0 0.00 0.00 8.54
TEMPLETON GLOBAL INCOME FUND 6.20   0.0 0.00 0.42 6.88
MORGAN STANLEY EMERGING MARKETS DEBT FUND 9.35   0.0 0.00 0.00 5.57
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND 113.92   0.0 0.00 6.17 5.43

STONE HARBOR EMERG MARKET FUND - EDF
STONE HARBOR EMERG MARKET FUND - EDF  


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