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Goldman Sachs Group Inc (NYSE:GS) Stocking Up On Emerging Market Bonds
Denver, CO, 07/15/2013 (Avauncer.com) – For a few weeks now, Goldman Sachs Group Inc (NYSE:GS)’s Asset management has been acquiring some emerging-market bonds. Since the financial downturn of 2008, this is one of the biggest routs. There has been an extreme selloff and investors now find that they have several opportunities to invest in emerging markets. Many senior bond managers like Mr. Swell have now been increasing holdings on local-currency bonds that are being sold by Mexico and local –currency, short-dated bonds that are being sold by Brazil.
Inflation concerns
Mr. Swell co-heads the global lead portfolio management that sits within the liquidity management and global fixed income team at GS and he feels that these two markets are now providing most of the opportunities, at the moment. As of 31March, this Goldman Sachs unit had $860B under its management. Swell is in charge of the fixed income segment which managed over $337B as of 31 March. He explained that concerns around rise in inflation have led to the change in bond prices.
The affecting factor
Long dated bonds in Mexico have been yielding around 7% while inflation stands at under 5%, which is likely to drop over the next few months. Inflation is the one factor that tends to have a major adverse effect on bond value. There has been growing concern over the health of emerging markets and the fact that the Federal Reserve is all set to withdraw its monetary stimulus is not helping any.
The Fed pull-back
The Fed’s bond-buying program currently stands at $85B per month and the fears that this will be cut back has sent the prices of the U.S Treasury bonds hurtling down. Since the beginning of May, yield prices have been on the rise which has sent out currents into global markets. Emerging market currencies and bonds that have largely benefited from the easy policy that had been adopted by the Fed since the decline in the Global economy were the ones that were dealt the hardest blow from the recent shake-up.
