Credit to pip global government bond investing

Merrill Lynch says institutions will follow global credit indices more than government bond indices within five years.

Who in their right mind would move to credit wonders Phil Galdi, New York-based managing director of fixed-income quantitative analysis and portfolio strategy. He notes that while spreads on corporate and agency debt, as opposed to global government bonds, have potential to compress, investors cannot rely on past performance in this new, uncertain era. Rating agencies are not impressed just this year 14% of corporate bonds were downgraded and there has been $88 billion of defaults, many from investment grade companies, he notes.

This is a burning question for many Asian pension funds and insurance companies looking to expand investment overseas, or seeking to improve lacklustre returns on global bond indices. Government yields are at...

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