In 2015, all commodity-sensitive assets were in steep decline. Inextricably tied to the strength in the U.S. dollar, commodity-producing countries and currencies were under pressure. But things have really been turning around so far in 2016.
The loudest argument we’ve heard for a prolonged pullback in bond yields in the United States (and around the world) has been the emergence of so-called “crossover buyers.” In this scenario, investors from Europe and Japan, disillusioned by the low yields in their respective domestic markets, seek out the comparatively higher yields of U.S. bonds.
One of the biggest defining market movements of 2014 was the shocking decline in commodity prices1 —especially oil. Whenever markets are faced with such surprises, the critical question to ask is whether opportunities have been created.
Through the first quarter of 2013, eight out of ten G10 currencies depreciated against the U.S. dollar. With the Japanese yen leading the downward charge, investors in most developed markets sought the perceived safety of the U.S. dollar.
Over the past year, investors continued to look around the world for higher levels of income potential. For some, the decision to allocate to the debt of Australia and New Zealand in 2012 resulted in strong performance compared to U.S. Treasuries. But individual investors were not the only market participants looking to diversify their holdings internationally.
Australian bonds, like other top-rated government debt, have pushed through all-time lows in yields as investors search for high-quality debt in the face of economic uncertainty in Europe. As we previously discussed, investors could consider gaining exposure to Australia through the WisdomTree Australia & New Zealand Debt Fund (AUNZ).