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| Mark Dowding |
Invesco Asset Management will extend duration in its GT Bond Fund in anticipation of interest rate rises. Mark Dowding, head of global bonds in London, said the duration of the $400 million global fund, currently at 4.5 years, will be extended to 5.7 years to match that of the J.P. Morgan Global Government Bond Index in the coming months. "We are in the teeth of the bear market and we are underweight duration in all the major bond markets. However, we expect U.S. interest rates to move higher in August and it is time to be taking profits on our short duration position," he said. Dowding declined to specify which longer-dated positions he is considering. At present, 30% of the fund is in corporate bonds, a level Dowding plans to maintain for the time being. He declined to name names, but said he is optimistic on telecommunications, which constitute 6-7% of the fund. He expects corporate bond spreads to continue to tighten in the months ahead as creditworthiness continues to improve.
On a regional basis, the fund is broadly in-line with the index, with 40% in European securities, 30% in Japan, and 30% in the dollar block. However, Dowding is neutral duration in the Eurozone, with underweights in Japan and the U.S. "The chance of interest rates rising in the Eurozone is the most remote, what with growth being the weakest and interest rates being the highest [relative to Japan and the U.S.]," said Dowding. He added that he does not expect any increase in European rates until 2006.
