For financial professionals in Finland

Strategic Fixed Income: Japanification — Europe first and now the US

John Pattullo, Co-Head of Strategic Fixed Income, explains how the suppression of volatility by the US Federal Reserve during the Covid crisis has led to the Japanification of the US corporate bond market.

 Key takeaways:

  • Just as we saw in Europe, Japanification — which refers to Japan’s experience of persistently low interest rates, low inflation and low growth and where the central bank has completely supressed volatility — has now spread to the US and, at a remarkably faster pace.
  • As was the case in Japan, the US central bank’s suppression of volatility, together with its backstopping of investment grade (and, to a lesser extent, high yield) bonds, has created an almost idyllic environment to invest in corporate bonds.
  • With the collapse of the sovereign yield curve in the US, there have been large inflows into the US corporate bond markets in recent months, with overseas buyers as the major participants. Interestingly, given the unending search for yield, quality, well‑known investment grade names are now almost the new sovereign bonds or the new benchmark rates.

Note: this video was recorded on 14 August 2020.

John Pattullo

John Pattullo

Co-Head of Strategic Fixed Income | Portfolio Manager


2 Sep 2020
4 minute watch

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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Important information

Please read the following important information regarding funds related to this article.

The Janus Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985, managed by Henderson Management S.A. Henderson Management SA may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions.
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John Pattullo

John Pattullo

Co-Head of Strategic Fixed Income | Portfolio Manager


2 Sep 2020
4 minute watch