Inflation as major reason to invest in global bond markets
The best government bond market may be outside the United States.
George Bory of Allspring Global Investments pushes his clients toward countries where central banks are raising interest rates or have different inflation dynamics.
“Bond markets everywhere have rushed to price in inflation. In places like the United Kingdom, certainly across Europe, even in places like Australia — we’ve seen a significant increase in central bank tightening expectations,” he told CNBC’s “ETF Edge” this week. “Some of this has already been fulfilled. The ECB raised rates just a few weeks ago. The expectation is that they will do a little more. But unless the Fed approves these moves, they will have to move at a slower pace than perhaps priced in.”
Bory works as chief investment strategist in fixed income at Allspring, an asset management firm focusing primarily on fixed income, money markets and equities. According to Allspring’s website, customers range from advisors and financial advisors to corporations and financial institutions.
“Developed short to medium term global government market bonds [are] “It’s not a bad point, especially for central banks that are really tied to inflation,” he said. “If they were to move aggressively, that would help bond investors. And so, by adding international time…we mix it with some US time. “Now we’re playing different rate cycles and it’s working really well.”
The Fed has not increased interest rates in the US since July 2023. CME Group’s FedWatch indicator Late Friday data shows a 78% chance the Fed will raise interest rates in December. Rates dropped to 68% in January 2027.
Meanwhile, Bory draws attention to the European Central Bank’s move earlier this month. The ECB increased interest rates by 25 basis points to 2.25% on June 11; This was the first rate hike since September 2023.
Steve Laipply, global co-head of iShares Fixed Income ETFs Black RockHe also sees advantages for investors going abroad. He points to fixed income securities issued in Europe, which offer lower risk and higher returns.
“Most of our clients, most of the bond investors, [are] It’s very US-centric,” Bory added. “There’s a big world out there, you know. The global bond market is huge, and diversifying your maturity, credit risk, and even security selection can do good things for your portfolio.”
