Why the investment case for global bonds has been 'revived'

Over the past year, global bond markets have been buffeted by a storm of political and macro headlines: the pace and timing of US Federal Reserve rate hikes; Brexit; China slowdown concerns; Italian referendum; oil markets and key elections in Europe and the US.

These developments have pushed up the risk premia of global yields and the US dollar, fueling sharp moves across developed and emerging markets (EMs) bonds and currencies. Today, a more benign macro and political backdrop has revived the investment case for global bonds. The combination of the Fed's gradual approach to rate increases, receding fears of a populist wave spreading across Europe, and signs that global central bank efforts to jumpstart a recovery are finally bearing fruit, support a more constructive outlook. EMs in particular stands to benefit in this scenario. Yield s...