FOUR ASPECTS OF GLOBAL FIXED INCOME MARKETS

 It seems that financial fixed income investments are not living its best:

 1. Probably most readers know that central banks in Europe and Japan have pushed short-term interest rates into negative territory. These rates, in turn, has led yields on sovereign debt to a negative field.

 2. The solution found by Japanese and European investors has been to divert their money to the US, where yields of Treasuries remain positive. The benchmark 10-year currently produces more than 1.5%. This performance was fine until recently; however, later, hedging costs increased so much, that current performance is no longer sufficient to maintain positive returns.

3. The solution Japanese and European investors are now looking for is the corporate bonds of the United States, which, despite being at historic lows, still generate positive returns. However, they seem to be losing sight of the risk factor, because the credit downgrades and defaults have been rising quietly.

4. Meanwhile, Latin American investors who have their money in global markets still are not worried, since the devaluation of their currencies is offsetting the negative returns on their portfolios, which therefore show positive results. However, this does not mean they are making a profit; the true is that their capital is depreciating day by day, and if the devaluation recedes, losses will then become apparent.

What alternatives are left for fixed income portfolios?