At T. Rowe Price, we expect 2018 to mark the beginning of a new era in bond investing as central banks start to withdraw their quantitative easing, with some also set to hike interest rates. Bond investors will need to cast a wider net, with an emphasis on detailed research, active security selection, and sector rotation.
key points
- Developed market central bank tightening is set to begin in earnest in 2018, ending an almost-decade-long period of quantitative easing (QE).
- Tightening will take place against a background of low yields (high prices), stretched valuations, the possibility of inflation and a number of ongoing geopolitical risks.
- However, we believe growth will remain firm in many parts of the world, creating compelling opportunities in select corporate bond sectors.
- In this environment, active management will be key.
All eyes on central banks
Fixed income markets in 2017 were driven by US politics, specifically the waxing and waning of expectations concerning Trump administration policies. The key driver in 2018 will be the extent and speed of central bank tightening, although is not yet clear how quickly individual central banks will seek to do this, nor how it will affect markets. Read the T. Rowe Price 2018 Global Market Outlook
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