BNY Mellon’s bond managers set sights on emerging markets and US
Continued uncertainty over the debt problems in Europe is driving BNY Mellon’s fixed income specialists Standish Mellon Asset Management to favour the US and emerging markets in the second half of the year.
Standish sees potential in US corporate credit as the upcoming US election and speculations about the potential fiscal cliff, slated for the start of next year, are attracting attention to the country.
In this space, the managers favour areas that have so far seen less demand over those that have performed strongly in the first half of the year. Thus, shorter duration, medium quality credit is looking more attractive than intermediate duration high yield bonds.
Undervalued emerging market currencies, such as the Mexican peso, are looking attractive too.
David Leduc, CIO of Standish said: “We expect certain trends to continue, such as that growth in emerging markets will remain higher than in advanced economies. We’ll continue to look for value in both local currency and external emerging market bonds.”
But Standish warns that EM currencies will remain highly correlated with the global risk sentiment, which is burdened by fiscal uncertainly in the US and Europe and the economic slowdown in China.
Standish manages around $97.5bn in fixed income products for BNY Mellon Investment Management, including corporate credit, EM debt, core and opportunistic strategies.