Emerging Markets, Selective High Yield Debt May Offer Opportunities, Standish Says

BNY Mellon Investment Boutique Says Sectors Have Benefited during Highly Volatile Markets

Aug 26, 2014, 07:50 ET from BNY Mellon

NEW YORK and LONDON, Aug. 26, 2014 /PRNewswire/ -- Emerging markets and selected high yield debt appear to offer opportunities in the current environment of heightened geopolitical risk, according to the summer bond market observations from Standish Mellon Asset Management Company LLC, the Boston-based fixed income boutique for BNY Mellon.

Periods of market volatility associated with this type of risk historically have provided buying opportunities, according to the Standish Bond Market Observations July/August Part II (BMO).

"Over the past two decades, investors who bought the popular global or high yield bond indexes during spikes in volatility on average ended up with positive total return six months later," said David Leduc, chief investment officer of Standish and author of the report.

This time around, conflicts in Ukraine and Iraq have contributed to higher volatility and risk assets began to sell off, the report said.  Standish expects both Ukraine and Iraq will settle into an unstable equilibrium. While both have the potential to unsettle financial markets, Standish said they believe that neither is likely to derail global economic expansion in the second half of 2014.

Looking at emerging markets, Standish said valuations appear to be particularly compelling in Latin America and Asia.   However, Leduc added, "We worry about the vulnerability of the sector to the eventual tightening of Fed policy despite the improvement in market technical signals."  The improvement in technical signals followed the sell-off that occurred in the spring of 2013 when talk of tapering quantitative easing first arose, Standish said.

Overall, Standish expects the U.S. and China to lead accelerating global growth in the 2014 second half.  The report cites stimulus measures implemented by China earlier in the year that are beginning to filter through to the broader economy.  The report also noted that economic output in the U.S. rebounded in the second quarter of 2014. 

Notes to Editors:

Standish Mellon Asset Management Company LLC, with approximately $165.6 billion of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit, emerging markets debt (dollar-denominated and local currency), core / core plus, tax–sensitive, short duration, stable value and opportunistic (U.S. and global) strategies.  Standish also offers full service capabilities in insurance client strategies and liability driven investing. The firm includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel acting as dual officers of Standish.  Standish, Dreyfus and The Bank of New York Mellon are affiliated subsidiaries of BNY Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Learn more at www.bnymellon.com, or follow us on Twitter @BNYMellon.

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