DM round-up: Sober decade ahead, says Deutsche
Bond returns have come closer to matching equity returns over the past 25 years, according to Deutsche Bank. European credit strategists Gary Jenkins and Jim Reid looked at more than a century’s worth of data from the US. They found that, over a 105-year sample, equities produced a real total annual return of 6.53%, compared with 1.42% for US Treasuries and 2.5% for corporate bonds. But since 1980, equities outperformed corporates by just 1.5 percentage points.
For corporates to give the same annual return over the next 10 years, they would have to tighten by 420bp, while Treasuries remained static. “The starting point suggests a much more sober period ahead for absolute returns in risk assets,” according to Reid and Jenkins.