Due to tightness in the U.S. labor markets, a number of investors are worried we will see inflation pressures. We have seen a surge of inflows toward U.S. inflation-protected bonds in the last six months as a result of these macro drivers. But is that the best approach?

As interest rates rise, bond portfolios will generally lose value. In response, investors have shifted to cash or cash-like positions, such as short-term Treasuries, while they wait to allocate with more conviction. However, in many cases, these positions have lost money in rising rate environments, while those consisting of floating rate Treasury notes (FRN) have not.

On October 1, the Chinese renminbi (denominated in yuan) became part of the Special Drawing Right (SDR) of the International Monetary Fund. This decision and its implementation are historic, as the renminbi became the first emerging market currency to be incorporated into the basket.

2016 has been a volatile year for many asset classes. During times like these, it is not unusual for safe-haven assets, such as U.S. investment-grade fixed income, to experience outsized total returns. However, this rally is not just about a risk-off scenario leading to a run-up in bond prices.