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Bonds are struggling in difficult investment climate says Blackrock Institute

Friday, March 30, 2012

Beverly Chandler, Opalesque London: Blackrock’s Investment team from its Investment Institute has updated its January report to comment on the record lows in bond yields. They ask three questions: Is this another bout of rudderless "risk-on/risk-off" trading? Or does the yield spike mark the end of the 30-year bull market in bonds? And where does that leave the global rally in stocks? ,p> Looking forward, the team, comprising Russ Koesterich Chief Investment Strategist BlackRock iShares, Rick Rieder Chief Investment Officer BlackRock Fundamental Fixed Income and Richard Turnill Head of BlackRock’s Global Equity Team believe that the yields of many safe-haven government bonds have been beaten down so much that many offer negative returns after factoring in inflation. "Even after the recent yield spike, many bonds look richly valued. We believe yields will grind higher, with benchmark 10-year US government bonds likely yielding 2.75% to 3% by year end. This is no radical change: they yielded 3% back in September 2011 when the economy looked far sicker than today" the team says.

They do not believe that a yield explosion is in the cards. "Global central banks stand ready to buy long-term bonds if higher yields threaten the economic recovery. Insurers and pension funds have been eager buyers because they are desperate for yield in a new world of long liv......................

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