BlackRock has stated that it expects the US Federal Reserve to increase interest rates in the autumn, with the Bank of England following suit in November or February 2016.
The asset manager, through its BlackRock Investment Instititute mid-year 2015 investment outlook, is anticipating an end to zero interest rates and with it, a renewed interest in the global bond market, which has been stuck in the doldrums for some time.
The report states that market trepidation about the first Fed hike in nine years is awakening global fixed income markets lulled into complacency by years of near-zero rates and regular doses of quantitative easing.
"A September rate hike would likely hit short-maturity bonds," said Russ Koesterich, global chief investment strategist for BlackRock. "Yet, any rise in long-term rates should be subdued by yield-hungry buyers."
Investment ideas from BlackRock include putting US credit (high yield, mortgages and even investment grade bonds) over government debt. In the Eurozone, BlackRock suggests investing in quantitative easing-supported subordinated bank debt and selected long-maturity peripheral bonds.
Within emerging market fixed income, Koesterich prefers hard currency emerging market bonds over most local currency bonds and prefers countries with reform momentum and falling inflation, such as India, China and Mexico.
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