Global Bonds: Diverging Economic Stories Drive Returns

Though markets crept up slightly after the Fed rate rise announcement, the market reaction overall was muted, as the move had generally been widely anticipated

Shannon Kirwin 31 December, 2015 | 10:07AM
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Investors around the globe have been watching the US Federal Reserve closely since the start of the year as the central bank dropped hints about the possibility of its first rate rise since 2006. Finally, after the Fed’s December 16 meeting, Chairwoman Janet Yellen announced that the bank would raise the ceiling on its overnight lending rate by 25 basis points to 0.50%, with the plan to continue raising rates gradually over the months and years to come.

Adding to the pressure felt by many commodity-exporting economies, the oil price tumbled steadily

Though stock markets crept up slightly after the announcement, the market reaction overall was muted, as the move had generally been widely anticipated. In fact, the US dollar has strengthened by roughly 10% against the euro since the start of the year, in large part as a result of investors pricing in a hike in rates.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Pictet-Global Emerging Debt I GBP351.60 GBP0.44Rating
Templeton Emerging Mkts Bd A(acc)USD11.74 USD0.59Rating

About Author

Shannon Kirwin  is a fund analyst with Morningstar