Bond managers say recovery distant

Global fixed income managers say a global economic recovery is “some way off”, according to Standard & Poor’s (S&P).

In its latest annual review (PDF) of the global fixed interest sector, most managers interviewed by S&P did not expect a global recovery until the second half of 2009 at the earliest.

Thames River was one of the most pessimistic groups, expecting the global economy to deteriorate further. According to S&P, Thames River said that government bonds remained an attractive asset class, and with a duration of 8.5 years, it was among the groups most overweight in the sector.

Despite this pessimism, the report notes that some managers predict a recovery for sterling against the euro “fairly soon”. It says several managers were bearish on the euro relative to sterling.

For example, Old Mutual’s fixed income team said that sterling was oversold, while Thames River said it looked cheap against the euro. But Thomas River went on to argue the dollar had “more or less completed its correction and should underperform as the Fed continues to print money”.

Meanwhile, S&P downgraded the offshore BNY Mellon Global Bond fund to from AAA to AA status as part of its annual review of the global fixed interest sector.

S&P had placed the fund under review following the departure of its previous manager, Stewart Cowley, at the end of 2008. The fund was taken over by Paul Brain, the manager of the Newton Global Dynamic Bond fund, since its launch in April 2006.

While acknowledging Brain’s experience and track record, S&P said it is less familiar with his style, “something we feel is significant in a relatively high discretion mandate such as this”.