The Strategist

Survey: Managers are concerned about inflation and global debt

03/17/2021 - 03:30

International investors are increasingly concerned about accelerating inflation and rising debt market rates, which bode well for the global economy. However, as long as central banks keep monetary policy accommodative, the debt crisis will be delayed.

According to March's Bank of America Merrill Lynch (BofA) survey of portfolio managers, only 12% of respondents identified COVID-19 as a key risk with unpredictable consequences for the global economy. This is more than half the figure for February and the lowest ever recorded for a pandemic. A total of 220 portfolio managers with $630bn of assets under management took part in the survey. 

Investors' optimism is linked to the high rate of vaccination. According to Bloomberg, more than 380 million vaccines had been used worldwide by March 15, more than three times the number of COVID-19 infections.

At the same time, there is growing concern among managers about inflation. According to 37% of respondents, it is rising consumer prices that could be a key risk to the global economy.

Rising inflation expectations have been reflected in the level of debt securities rates. According to Reuters, the yield on ten-year US Treasuries has locked above 1.6% per annum, having added almost 0.7 percentage points since the start of the year. Rates on debt markets of developed and developing countries are rising.

This rise poses serious risks to the global economy, 35% of global managers warn. Governors' concerns are understandable, as the total accumulated global debt, according to the IMF, is the equivalent of $281 trillion. In recent years the growth rate of the debt burden has been at its maximum, while borrowing has been at historically low rates.