Equities, Bonds, Commodities and Currencies in March

GLOBAL INVESTMENT STRATEGY: We take a look back at the trends and events for each major asset class in March

Andy Brunner 11 April, 2013 | 7:00AM

Contrary to the expectations of many commentators, March was a month in which both of the main asset classes produced positive returns. Of course, there were disappointing areas within both equities and bonds, principally emerging markets which, together with commodities, posted losses for a second consecutive month.

Fixed Income

UK index-linked gilts headed the asset class return tables surging 4% over the month in response to the changed inflation remit in the recent budget. Elsewhere in fixed income, yields dropped sharply in most main government bond markets but with gilts and bunds outperforming treasuries. This not only reflected some safe-haven support following developments in Cyprus, but also further cuts to economic forecasts and growing expectations of a further round of UK QE and rate cuts in the EU. By far the highest returns came from Japanese JGBs, however, as markets priced in very aggressive monetary easing by the BOJ’s new leadership which, in addition to massively expanding its bond purchase programmes, is likely to extend maturity purchases beyond ten years.  EU peripheral bond returns were generally modestly positive although yields trended a little higher in most countries.

Emerging market debt had another poor month, alongside most emerging markets assets, facing growing headwinds in a number of individual countries. Spreads backed up to over 300 basis points at which level interest may begin to return.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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