Bond firms stay on defensive as QE3 rejected

1 September 2011 8:00 am | By Joanne Ellul

Bond managers have held their defensive positions after US Federal Reserve chairman Ben Bernanke decided against a third round of quantitative easing.

In his widely anticipated speech at Jackson Hole, Wyoming last week, Bernanke did not launch QE3 but said the Fed’s policymaking committee will take an extra day at its next meeting in September to discuss the “merits and costs” of further monetary stimulus.

Between December 2008 and March 2010, the Fed issued $1.7trn of quantitative easing and last November it announced a second round worth $600bn.

Aegon Asset Management bond manager Stephen Snowden says he was hoping that Bernanke would announce a third round of QE, which he says would have prompted a credit rally.

Snowden, who manages the £242.5m investment grade bond and £8.9m investment grade global bond, says: “There was a bit of a rally on the equities side but there was very little follow through on the credit side. We are sticking with our current defensive position.”

He says if the Fed announces a further round of QE in the coming months, he will use it as an opportunity to take a more defensive position.
Ignis Asset Management head of credit Chris Bowie says the effects of Bernanke’s speech were not big enough to change the exposure in his £261.1m corporate bond fund. He says: “There needs to be weaker economic data before Bernanke can justify more quantitative easing.”

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