(Bloomberg News) For the first time since the start of 2008, bonds were the only investments to provide positive returns amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion.
Fixed-income assets -- from Australian government debt to U.S. Treasuries to global junk bonds -- gained 0.7 percent last month including reinvested interest, according to Bank of America Merrill Lynch index data. The MSCI All-Country World Index of stocks lost 1.1 percent including dividends while the Standard & Poor's GSCI Total Return Index of metals, fuels and agricultural products fell 0.5 percent. The U.S. Dollar Index dropped 0.3 percent.
"Concerns of an economic slowdown and renewed risks over Europe are the biggest drivers," Anthony Valeri, a market strategist in San Diego at LPL Financial, which oversees $330 billion, said April 26 in a telephone interview. "There's renewed concerns about Europe, and Spain in particular."
Investors sought the perceived safety of fixed-income investments after U.S. job growth in March failed to meet economists' forecasts and amid growing concerns that European leaders will fail to manage their debt loads. Joblessness in the euro area probably rose to 10.9 percent last month, the highest since 1997, according to economists surveyed by Bloomberg.
Austerity Opposition
In Europe, growing political opposition to austerity measures forced Italy to delay its goal of balancing the budget by one year to 2014, joining Spain in missing fiscal targets amid a worsening recession. French President Nicolas Sarkozy may be toppled in a May 6 vote and the Netherlands will hold elections in September after the cabinet resigned over spending cuts and tax increases.
The Washington-based International Monetary Fund said in an April 17 report that the world economy will expand 3.5 percent this year, down from 3.9 percent in 2011, as growth in Europe shrinks 0.3 percent.
"Europe came to the forefront of a lot of people's concerns," Matthew Duch, a taxable fixed-income money manager in Bethesda, Maryland, at Calvert Investments Management Inc., which oversees more than $12 billion, said April 27 in a telephone interview. "Driving this month has been a reluctance to invest in risk."
Bank of America Merrill Lynch's Global Broad Market Index, which tracks more than 19,600 securities with a market value of $43.2 trillion, rebounded from a 0.14 percent loss in March, bringing its year-to-date return to 1.9 percent. Average yields fell to 2.02 percent from 2.12 percent a month ago.
Treasuries Gain