Artemis' de Tusch-Lec: The curious case of the bond proxies

The curious case of the EM bond proxies

Buying bond proxies in response to falling bond yields and low interest rates is understandable, but irrationalities have begun to emerge in some parts of the market, explains Jacob de Tusch-Lec, manager of the Artemis Global Income fund.

Janet Yellen, chair of the US Federal Reserve board, seems like an unlikely tormentor. But the weapon she wields - a rise in the Federal funds rate - inspires genuine fear in the world of investment.  For the last five years, stockmarket indices have been helped higher by quantitative easing and by the Federal Reserve's signals that interest rates will remain 'lower for longer'. Global markets now stand at record highs. The gains for safe, defensive, income-paying stocks - the 'bond proxies' favoured by equity income funds - have been spectacular.  There has, however, been an excep...