Talk of market normalisation is way too premature and the wildcard of inflation remains a pressing concern for all bond investors, Invesco veteran Paul Causer has told Citywire Selector.
Causer, who oversees more than €12.1 billion in assets according to Citywire data, said recent rate rises by the Bank of England and the Federal Reserve have been interpreted by the market as a move towards familiarity but this is just an early step.
‘We are a long, long way from normalisation and it is still, in real terms, very far away. Yes, we have had one rate rise in the UK over the last 10 years and the ECB is starting on the path to tapering, even if it daren’t call it that, but it is still hugely accommodative. They all are. So discussions around rate rises in Europe, for example, remain a long way off.
‘We are looking if there is significant change in approach going on among the central banks and what we see is continued central bank intervention. There remains synchronicity in their approaches for now. Perhaps we could be reaching something of an inflection point in the sense that we are not normalising but getting closer to the end of a very abnormal phase in markets.’
Causer added that central banks are all currently contending with one ‘wildcard’ element, which is the spectre of inflation returning. ‘There is masses of debate about this and the central banks have been going their own ways to for quite a while in combatting this.
‘There is a dilemma that the Phillips Curve may have broken down and all kinds of theories over how central banks are addressing headline inflation and that remains a key concern for bond investors.’
Causer was speaking on the third anniversary of the Invesco Global Income fund, which he co-manages with Paul Read and a six-strong global equity team led by Nick Mustoe. It has returned 20.8% in euro terms since launch while the Libor EUR 3 Months, its reference index, fell 0.6%.