Hasenstab Says ‘Nowhere Near’ Buy-the-Dip Time Amid Bond Wipeout

(Bloomberg) -- The sell-off in global bonds has some debt investors pouncing on assets that haven’t looked this cheap in decades. Don’t count Michael Hasenstab in that group just yet.

As he watched bets in Argentina blowup last year, Franklin Templeton’s star money manager began to de-risk his portfolios. That cautious approach has helped him dodge the worst of the recent rout. His $26 billion Templeton Global Bond Fund ranks in the top quartile among peers this past month, according to data compiled by Bloomberg. Meantime, the $9.3 billion Templeton Emerging Markets Bond Fund, which returned -8.4% over the last year, has beaten 91% of peers during this past month’s market meltdown.

“If there’s panic and it goes on for a protracted period of time and there’s big dislocations, there will be good assets that become valuable,” Hasenstab said this week. “We’re nowhere near that, but we need to start thinking about it.”

The bond chief said he sees value in some local currency markets that generate positive yield. Hasenstab favors the Japanese yen and Swiss franc in particular. He said he’s largely avoiding emerging-market corporate credit.

One of his concerns is how increased government expenditures in response to the coronavirus will drive up fiscal deficits in many nations. Hasenstab said this could prompt some populist leaders to embrace modern monetary theory, printing more money to cover their deficits.

In the meantime, his colleague Sonal Desai, Templeton’s chief investment officer for fixed income, said it’s best to stay patient.

“This shakeout was a long time coming,” she said. “This is not the time to jump all in or jump out. It’s time to take a deep breath.”

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