Aberdeen Asset Management said it had a positive outlook on the fixed income market for the year ahead but urged investors to be wary of rising inflationary pressures.
"We see bond markets doing okay, they'll outperform cash, we have got a nice carry and that's true in the developed markets and most certainly in the emerging markets," the fund manager's global head of fixed income Paul Griffiths said in Sydney yesterday.
"So we have got a positive view on bonds but it's somewhat more muted than it was a year ago, we have come quite a long way."
He said the increase in inflation globally has been surprising.
"First of all obviously we got food and commodity price inflation globally and there is some potentially serious implications of that," he said.
"And then ofcourse along with the commodity and food inflation, there is a more general inflation scene in many of the emerging markets and clearly that's also something that's caused many to be concerned, perhaps rightly, about those emerging markets particularly from a debt perspective.
"When I look at those long-term risks and inflation then one of the things that concerns me is that the food and energy story is not just a blip and we begin to get inflation come through in a more systemic way into some of the major economies worldwide.
"And I think that if we see that clearly there are very, very significant implications for bond markets in the negative sense."
Still, at the moment there were limited signs that inflation was becoming a systemic problem in developed markets, he said.
In terms of portfolio positioning, Aberdeen favoured emerging markets debt.
"We are owning more Asia than US and more Asia than Europe, so we do favour the Asian and emerging markets regions within our portfolios," Griffiths said.
"We do like within emerging markets obviously Asia but favour Latin America more than Eastern Europe for example."
