Developed World Bonds Still Expensive

Changes in monetary policy in the US, Europe and the UK have shifted the outlook for global bonds, but prices are still high 

Morningstar Analysts 6 November, 2017 | 3:49PM

Federal Reserve chair Janet Yellen

While the third quarter of 2017 saw global bonds return less than 1% - against a rise of over 4% for world equities - the period marked a key turning point in the direction of monetary policies that have underpinned extraordinary medium and long-term gains. The key date in this change was September 20, when the US Federal Reserve formally announced that it will begin to unwind its $4 trillion stimulus programme.

Other central banks followed the Federal Reserve’s lead: the European Central Bank, in its late October meeting, said that it would halve its monthly bond purchases from €60 billion to €30 billion from January next year. The Bank of England raised interest rates for the first time in 10 years on November 2. The Fed is expected to raise interest rates again at its December meeting.

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