Unless the economic situation in the USA worsens dramatically, there is no danger of any noticeable decline in yields. “On the contrary, yields could even rise slightly if the economy recovers”, Gerlinger pointed out. This is offset by bond purchases by the US Federal Reserve, however, so any change should be rather small.

High yields are also being supported by the Fed’s announcement that it intends to buy such paper as well. No notable defaults have been registered in the context of the rapidly occurring recession to date. “Basically, however, we are experiencing higher risks in this market segment in such recession periods”, Gerlinger explained. “We expect the segment to continue to be characterised by higher volatility, and we consider US corporates to be attractive compared to government bonds.”

Emerging market bonds are largely influenced in their development by the US dollar and US interest rates. “The Fed rate benefits these bonds, and in addition they offer an attractive spread, particularly bonds in hard currencies”, Gerlinger said. Only falling oil prices might cause severe problems for some countries, with corresponding negative effects on the bonds. “In any event, we are favouring hard-currency bonds and these mainly from Asia”, stated Gerlinger.

In Europe, the pandemic has also depressed yields on German government bonds. “At the current time, bonds are really only suitable as an insurance instrument against periods of stress”, according to Gerlinger. The fiscal and monetary policy measures adopted failed to lead to rising yields, which remains unattractive in absolute terms. Price gains are only possible if there is an increase in risk. “The fiscal union in the EU, which is foreseeable to come through the back door, favours government bonds from the peripheral states, which in turn may even lead to slightly rising yields on German government bonds”, said Gerlinger.

Unconstrained strategies are increasingly gaining importance because of the uncertainty about further developments. “With their flexible investment policy, they have the advantage of reacting quickly to market changes”, Gerlinger concluded.

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