Fixed Income Update | Lord Abbett
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Fixed-Income Insights

Lord Abbett Portfolio Manager John Morton offers his insights on the emerging-market bond market in the week ahead.

Transcript

John Morton, CFA

Portfolio Manager

Air Date: February 3, 2021

00:00:03.389

I’m John Morton, lead portfolio manager for emerging markets here at Lord Abbett.

00:00:10.260

INTERSTITIAL: Emerging Market Bonds: The Current Environment

00:04:50

One of the key considerations when valuing emerging market debt as an asset class is really the state of global liquidity and global capital flows. If we find the capital flows are moving from the developed world to the emerging world, that generally creates a very strong backdrop for emerging markets. I think what's important in this instance is that we have a combination of a higher degree of global liquidity--you know, the central banks in the developed world just continuously look to deal with the COVID crisis by increasing liquidity at a much higher rate than they have historically.

The combination of the low yields in the in the developed world relative to the higher yields associated with emerging markets investing will drive a lot of those global capital flows into the emerging world. And we expect those global capital flows to drive asset prices up considerably in EM for the next two to three years.

INTERSTITIAL: Emerging Market Bonds: A World of Potential Opportunity

00:07:44.280 --> 00:07:52.830

I think One of the key attractions to investing in emerging markets is the diversification opportunity it provides to U.S. and really, global investors. The team looks at 72 different countries and we're talking about, you know, close to 2000 different companies that comprise our universe. So there's a lot of different places we can look for opportunities for investors. One of them that we're finding right now is in the Brazilian commodities market, you know, we find that that's very strong.

We view Brazil as the next agricultural superpower and a lot of the investments that we're doing either in logistics or transportation are very much in line with that. We also see a strong opportunity in Turkey, which is really between East and West, and there's a broad range of opportunities in terms of manufacturing and banking.

I think probably one of the key regions we're going to focus on this year is really going to be Asia. The Asian entities seem to have done a very good job in dealing with the COVID crisis and we expect their economies to come online sooner than many other countries and regions of the world. And I think we're already seeing an ad in the most recent economic statistics coming out of Asia.

00:13:58.350 --> 00:14:01.950

Thank you for listening this morning and thank you for your continued interest in Lord Abbett.

________________________________________

Unless otherwise noted, all discussions are based on U.S. markets and U.S. monetary and fiscal policies.

Asset allocation or diversification does not guarantee a profit or protect against loss in declining markets.

No investing strategy can overcome all market volatility or guarantee future results.

Market forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. High-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. Bonds issued or guaranteed by non-U.S. governments and governmental entities (commonly referred to as ‘‘sovereign debt’’) present risks not associated with investments in other types of bonds. The sovereign government or governmental entity issuing or guaranteeing the debt may be unable or unwilling to make interest payments and/or repay the principal owed. Non-U.S. investments generally pose greater risks than U.S. investments. The securities markets of emerging-market countries tend to be less liquid, to be especially subject to greater price volatility, to have a smaller market capitalization, and to have less government regulation. Investing in non-U.S. denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be increased in emerging markets.

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