The race to win fixed-income mandates has been on for decades, but perhaps never has it been as competitive as it is in 2015. To discuss the lay of the fixed-income land and what differentiates strategies, firms, and the eventual winners and losers, I sat down recently with CIO Editor-in-Chief Kip McDaniel. What follows is a bit of our discussion—and Pioneer’s view of the future.
To read the full interview, click here.
CIO: How are you reacting as a firm—providing new strategies, or trying to pivot old strategies to new focuses? Continue reading
Last week the Labor Department released another very strong jobs report. That was good news for the economy, but bad news for investors. Payroll employment rose 295k, with revisions of -18k and the trailing 6-month average of 293k is at a 15-year high. The industry breakdown was fine: (retail +32k, construction +29k, manufacturing +81k, mining and logging -8k) and (private +288k, government +7k). The unemployment rate fell from 5.7% to 5.5%, a new cycle low. Continue reading
Posted in Economy, Industry Insights, Markets
Tagged Bonds, Capital Markets, Central Banks, ECB, economy, Eurozone, Fed, gasoline, Greece, inflation, jobs report, PMI, USD
The Central Bank bonanza has continued to lift financial markets, especially risky assets, towards new highs. This has happened in a weak economic framework, for most of the areas, further exacerbating the divergence between financial markets and economic fundamentals. The level of government bond yields has entered uncharted waters. In the Eurozone at the time of writing, 93% of bonds return less than 2%.*
The Pioneer Investments European Equity team have noted that a recent report by the Pension Protection Fund in the U.K. estimates that, on average, U.K. defined benefit pension funds saw liabilities increase by 29% in 2014 alone, as low interest rates have meant asset growth has not kept pace with the growth in liabilities.
What did Fed Chairwoman Janet Yellen say about raising rates at last week’s Humphrey-Hawkins testimony? She promised a wording change (“patient”) before rates were increased, but disavowed any implied promise that rates wouldn’t rise until the second meeting after the change, or that dropping the word implied a hike two meetings later. Yellen suggested “patient” will be replaced by more data-dependent language.
Her prepared testimony contained this tongue-twister: “. . . provided that labor market conditions continue to improve and further improvement is expected, the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when, on the basis of incoming data, the Committee is reasonably confident that inflation will move back over the medium term toward our 2 per cent objective.” (Comment: note her emphasis on expectations, rather than threshold levels: this will make it harder to predict the Fed’s timing…gives them more freedom of action.)
A dovish soundbite: raising rates too quickly could stall an expansion “that is really just taking hold.” A hawkish soundbite: “we don’t want to overshoot 2 per cent [inflation] on the high side.” Continue reading