Europe favoured over the mid term

Although the outlook for global bonds has improved over recent months, we remain modestly negative on the asset class over the medium term. There is considerable debate as to the risks associated with slowing economic growth, especially in the US. In our view the risks are limited. Growth in the US, Europe and the UK is slowing, but should remain at, or close to, trend well into 2001. This should preclude any monetary easing from respective central banks over the medium term. In the US, short-dated bonds remain overvalued, with two year Treasury yields trading 60 basis points lower...