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The fact that this asset class has struggled to break into higher trading territory over the past few weeks could well be a sign of near-term exhaustion. This may herald a period of correction in line with that being seen in G7 bonds. The heavy election schedule next year, especially in Latin America may well see a drop in structural reform momentum - as is currently the case in Brazil - which could mean that much of the good news is in the price. The overall fundamental picture though is still positive. This will prevent any correction turning into an outright bear market, and would present excellent buying opportunities. In fact, we still adhere to our view of continued medium-term upside. For now, however, the extent of money being pumped into the asset class, and the failure of prices to break higher, could point to a volatile few months ahead.
Income Security Recommendation January 2013 Issue.
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