Bonds: A World of Choices

Written by: Global Thought Leadertship | July 20, 2018

Source: Bloomberg, July 19, 2018. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.


  • The world’s financial markets are constantly changing, but one thing remains constant: opportunity can be found in unexpected places – and global investing is a time-honored way to transcend the limits of any individual market.
  • That’s quite apparent in this week’s chart, which shows the highest returns for global fixed-income investors over the past three years have come from diverse sectors of the fixed-income universe, including global high yield and Emerging Market (EM) hard-currency bonds. In contrast, US bonds, are fairly far back in the pack, thanks to the surge in short-end yields generated by the Fed’s recent rate hikes.
  • However, the narratives that underlie the variations in yield in the global bond market are more complex than just interest rates and currency valuations – including the rapid growth of global information technology companies based in emerging markets, localized needs for new infrastructure, and the evolving realities of global trade.
  • Also important in the current environment: finding the opportunities created by turmoil. As concerns about global trade and liquidity rise, markets often punish asset classes and categories with sound fundamentals – throwing out babies with the bathwater.
  • It takes an experienced, global, fundamentals-driven active investment approach to discern the difference between real damage and undeserved discounting, an approach that relentlessly seeks the inevitable errors in pricing that turbulence can generate.
  • Bottom line: When added to the natural diversification that comes from differing geographies, currencies and economic cycles, the potential benefit of looking outside the usual opportunity sets can clearly be seen.


All data Source: Bloomberg, July 19, 2018.


The Bloomberg Barclays Pan-European Aggregate Index tracks fixed-rate, investment-grade securities issued in the following European currencies: Euro, British pounds, Norwegian krone, Danish krone, Swedish krona, Czech koruna, Hungarian forint, Polish zloty, and Slovakian koruna. Inclusion is based on the currency of the issue, and not the domicile of the issuer.

The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.

The Bloomberg Barclays Euro Aggregate Bond Index is a benchmark that measures the investment grade, euro-denominated, fixed- rate bond market, including treasuries, government-related, corporate and securitized issues

The Bloomberg Barclays Global Aggregate Bond Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

The Bloomberg Barclays US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market.

The Bloomberg Barclays Emerging Markets Hard Currency Aggregate Index is a flagship hard currency Emerging Markets debt benchmark that includes USD-denominated debt from sovereign, quasi-sovereign, and corporate EM issuers.

The Bloomberg Barclays EM Hard Currency Aggregate Total Return Index includes debt denominated in US dollars, euros and other “hard” currencies.

The Bloomberg Barclays US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market.

The Bloomberg Barclays Global High Yield Index is a multi-currency flagship measure of the global high yield debt market.



Diversification does not guarantee a profit or protect against loss.

Active management does not ensure gains or protect against market declines.

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, guarantee of future results, recommendations or advice.  Statements made in this material are not intended as buy or sell recommendations of any securities. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. Information and opinions expressed by either Legg Mason or its affiliates are current as at the date indicated, are subject to change without notice, and do not  take into account the particular investment objectives, financial situation or needs of individual investors.