The beautiful thing about a global flexible bond strategy is that it is not constrained by an index or geography or a type of credit. High yield, investment grade, developed markets government bonds or emerging markets: you can move wherever you see the best opportunities.

We continue to be constructive on government bonds despite the very low level of yields. The Federal Reserve’s stated policy of allowing higher inflation and periods of overshooting the inflation target cannot be met if real yields are allowed to rise. Yields can only go up so much in such a highly indebted world.

We remain firmly of the view that we are in a deflationary environment rather than an inflationary one. The outlook for the economic recovery seems to have deteriorated, and for inflation to increase, economic activity will have to recover sharply. Demographics and technological disruption are powerful long-term suppressants of government bond yields, and the huge rise in debt levels over the crisis is likely to remain a drag on economies for some time.