Investment-Grade Bonds Gain in Europe as Investors Seek Shelter

Investment-grade bonds extended their record surge in Europe as investors sought out securities offering respite from turmoil in emerging markets.

Yields slid two basis points to 1.77 percent, the lowest since Nov. 15, according to the Bloomberg Euro Investment-Grade Corporate Bond Index, as investors spooked by China’s slowing growth and cuts to central bank stimulus pulled money out of emerging markets. The gauge climbed to an all-time high of 123.8 points, up from 122.4 points at the start of the year.

Chinese manufacturing contracted for the first time in six months in January, according to the Purchasing Managers’ Index (EC11CHPM) compiled by HSBC Holdings Plc and Markit Economics, as companies cut jobs in the world’s second-largest economy. Surprise rate increases by central banks in Turkey and South Africa failed to boost their currencies, while the U.S. Federal Reserve opted to continue reducing monetary stimulus.

“Investment-grade bonds in developed markets are a safe haven if you look for companies that aren’t really exposed to emerging markets,” said Richard Klijnstra, the head of credit at Kempen Capital Management NV in Amsterdam, which has about $2.2 billion of debt under management. “Money taken out of emerging-market assets has to flow somewhere and developed markets are a good place to be.”

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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