Tags: Hasenstab | Treasurys | emerging | markets

Templeton’s Hasenstab: Ignore Treasurys, Seek Emerging Markets

By Dan Weil   |   Friday, 22 Jun 2012 07:42 AM

US Treasurys have traditionally stood as the ultimate provider of risk-free return. But that’s no longer the case, says Michael Hasenstab, manager of Templeton Global Bond Fund.

So he suggests that investors look overseas for bond investment opportunities, particularly in emerging markets.

The problem with Treasurys comes on both the risk and return sides, Hasenstab tells Morningstar’s Investment Conference. With interest rates near record lows, investors aren’t adequately compensated for the risk created by the Federal Reserve’s excessive money printing.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

The huge monetary accommodation should lead to a weaker dollar, which means U.S. investors should set their sights elsewhere, he says.

Hasenstab talks up emerging markets in Asia and Europe.

He thinks the threat of a financial meltdown in Europe is overblown. “We do not believe in the Armageddon scenario for Europe.”

One point of strength in the continent is Germany’s exports, which surged 5.8 percent in the first quarter from a year earlier, Hasenstab says. “So our exposure in Poland and Hungary is really linked in to the German export machine.”

He’s also bullish on Ireland – “a country which I think has done an exceptional job of tackling very tough problems and is on the road to a solution.”

Many experts share Hasenstab’s bearishness on Treasurys.

“Whatever the combination of reasons, government securities do not pay enough to compensate for duration risk,” according to a research report from money management firm Smith Breeden obtained by Barron’s.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.



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