Both inflationary and deflationary concerns have emerged as global economies continue to struggle with recovery.  In this confusing environment, inflation-protected bonds can play an important role in plan sponsors’ asset allocation dilemma especially in light of yesterday’s Fed announcement of Quantitative Easing (II) implementation plan.  We find that IPBs have exhibited some distinct differences from other asset classes during the past decade. 

This Research Insight examines the impact of the unfolding European sovereign debt crisis, focusing on Greece, Portugal, Ireland, Spain, and Italy (GPISI). We use the new, short-horizon Barra Integrated Model (BIM Daily) to measure sovereign bond investment risk and provide insight into this market development. First, we highlight the background of this emerging crisis, in particular the links to government debt, fiscal deficits, maturity distribution, and levels of external borrowing. Then,...

High fiscal deficits, a sharp rise in the issuance of sovereign debt from major developed economies, rising inflation expectations, and possible changes in central bank rates could cause the yield curves from around the world to change significantly. This poses challenges for fixed income professionals who need to address possible non-parallel changes to the term structure. This paper illustrates the capabilities of Shift-Twist-Butterfly (STB) factor models to help address these challenges....

In 2009, emerging market bonds were among the top-performing assets in comparison to both global equity and fixed income. The recent, rapid rise in US Treasury yields and the concern over tightening monetary policies in certain countries led us to evaluate the relationship between global interest rate risks and emerging market bonds. We look at the risk characteristics of the market, along with the historical relationship of emerging market bonds with US Treasuries, other developed...