Global yields have started the New Year lower as the yield of the S&P Global Developed Sovereign Bond Index is currently 1.06%. The index did touch a low of 0.94% at the end of November before bouncing up to close out 2014 at a 1.08%. Ten years of history shows that the yield had been as high as 3.74% back in July 2007. For the year 2014, the total return of the index was 7.09%.
Euro-sovereign bonds as measured by the S&P Eurozone Developed Sovereign Bond Index returned 12% for 2014. The current yield of this index is 0.92%, a historic low given the available index history. The bond rally and forex drop in value has been driven by fears of disinflation and speculation that the European Central Bank will need to continue, if not increase, the purchases of debt to stimulate the region’s economy.
The S&P/BGCantor Current 10 Year U.S. Treasury Index closed out 2014 returning 11.10% for the year. Same as the global picture, the yield of the index began the year at a 3.03% and closed the year at a 2.22%. Since the year-end, the yield of this index has moved down to its current 2.12%. The slowing global economic growth and deflationary forces are driving demand for debt overall. The increasing strength in the U.S. economy and the Fed’s messaging of higher rates are being overshadowed by the bigger global picture.
The S&P U.S. Issued Investment Grade Corporate Bond Index outshined the lower credit S&P U.S. Issued High Yield Corporate Bond Index as the search for yield remained important throughout the year but eventually was overshadowed by risk off trades in response to the drop in oil prices. The indices closed out 2014 returning 7.71% and 2.66%, respectively.