Central Bankers Could Trump Fixed Income Fundamentals to Keep Rates Low, According to Standish

BNY Mellon Fixed Income Manager Cites Sharp Declines in European Government Bond Yields

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Nov 19, 2012, 07:47 ET

NEW YORK and LONDON, Nov. 19, 2012 /PRNewswire/ -- The actions of global central bankers and legislators may trump economic fundamentals, keeping interest rates low and affecting fixed income returns in 2013, according to the November Bond Market Observations from Standish Mellon Asset Management Company LLC, the Boston-based fixed income specialist for BNY Mellon.

The impact of policy intervention is evident in Europe, where peripheral economies such as Spain have experienced sharp declines in government bond yields as a consequence of policy intervention by the European Central Bank (ECB), the report said.

"Most major central banks in the developed markets are engaged in some form of unconventional monetary policy to counteract the fiscal drag," said Thomas Higgins, global macro strategist for Standish and author of the report. "This has resulted in low yielding sovereigns in the developed world.

Investors searching for yield are likely to be attracted to U.S. corporate high yield and emerging markets bonds, which typically offer investors significantly higher yields, Higgins said. Overall, though, Higgins said investors should expect more from bond interest payments instead of additional capital appreciation.

Higgins added that Standish expects some volatility in the coming months, which could provide buying opportunities for bond investors.

The U.S. Federal Reserve launched its third round of quantitative easing in September and has arguably been the most aggressive with its use of unconventional measures, which have had a material effect on fixed-income markets, the report said. Without this easing, Standish said studies suggest rates on the 10-year Treasury could be a full percentage point higher.

Notes to Editors:

Standish Mellon Asset Management Company LLC, with approximately $104 billion of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit (investment-grade and high-yield), emerging markets debt (dollar-denominated and local currency), core / core plus and opportunistic (U.S. and global) strategies. Standish also offers full service capabilities in insurance and liability driven investing. The firm also includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.9 trillion in assets under custody and administration and $1.4 trillion in assets under management, services $11.6 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.

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