With more than 30 central banks cutting interest rates and core non-US rates near historical lows, the hunt for yield is likely to persist. Opportunities remain in selective markets, such as US Investment Grade corporates and USD-denominated Emerging Market Debt.
The Citi Private Bank Global Investment Committee (GIC) raised the asset allocation to Global Equities from Neutral to Overweight at the recent November meeting. To fund this, the Global Fixed Income Underweight was deepened, primarily from the decrease in allocation to Eurozone government bonds. Cash was also reduced from Overweight to Underweight while Gold remained at Overweight.
The surge in bond valuations over the past year has driven income potential down for most traditional fixed income investors. Real (inflation-adjusted) yields have now fallen to negative levels in every developed market. As such, it has not been an easy time for fixed income investors looking to put money to work.
As surging bond prices drove an 11% global fixed income return over the past year, Citi analysts remain underweight on the asset class. US bonds remain an overweight, but only on a relative basis.
After reducing fixed income overweight to neutral in August, Citi’s Global Investment Committee (GIC) has dropped its allocation further to underweight as global bond yields fall to record lows.
