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The volatility of global stock and credit markets has delivered a sharp jolt to fund categories that had been buoyed by optimism at the start of the year.
Hopes of an early resolution to the US-China trade dispute and the prospect of steady economic growth gave way to panic as the Covid-19 pandemic sent countries plunging into recession.
Unsurprisingly, investors have turned to top quality sovereign government bonds to protect their capital, despite the paltry yields on offer.
Many developed countries have experienced low interest rate environments since 2009 as central banks cut policy rates to stimulate economic growth in response to the global financial crisis.
In response to the current crisis, central banks throughout the world have slashed short-term rates even further and investors have rushed to buy US government bonds which sent the bellwether US Treasury yield to an all-time low of 0.32% in early March.
Meanwhile, central banks led by the US Federal Reserve are also spending billions of dollars purchasing corporate debt, including so-called “fallen angels”, that is, bonds that have been downgraded to below investment grade.
In these extraordinary times for bond investors, FSA compares two global fixed income products which invest in high quality securities: the JPM US Aggregate Bond Fund and the Legg Mason Western Asset Global Bond Trust.