J.P.Morgan's Global Government Bond Index Rises 2.16% in August

Business Wire, Sept 2, 1998

NEW YORK--(BUSINESS WIRE)--Sept. 2, 1998--The J.P. Morgan Global Government Bond Index (GBI Global) rose 2.16% in local currency terms in August - its 12th consecutive monthly increase - as markets responded to the Russia crisis and its implications for global growth by moving into safe-haven bond markets. In US$ terms, the GBI Global was up 2.76%. Reaping the benefits of the flight-to-quality effect were the most liquid government bond markets: the U.K. rose 3.22%, the U.S. ( 2.79%), and Germany ( 2.41%), all in local terms. The Japan index managed to finish the month up 1.34% in local terms as investors focused on the safety of JGBs in relation to other assets.

Conversely, the South African rand and gilt markets came under intense selling pressure in August with the South Africa Bond Index dropping 15.34% in local terms and the rand falling 4.44% against the dollar. The main cause of these declines was investor sentiment, as widespread weakness in both global and emerging markets overrode sound domestic fundamentals.

Other bond markets affected by global weakness included Canada (-0.95%), Australia (-1.55%), and New Zealand (-0.03%), all in local terms. These three markets continued to be negatively affected by historically low commodity prices - the J.P. Morgan Commodity Index fell approximately 5.75% - and by the pessimism pervasive throughout global markets.

One of the more interesting developments was the relatively poor performance and extreme volatility of Sweden and Denmark toward the end of the month. Although both markets have had sound fundamentals and have performed well on forward-looking EMU convergence "plays" - with Sweden up 8.78% and Denmark up 6.37% YTD (both in local total return terms), in August these two smaller and less liquid markets experienced the effect of investor nervousness in both bond and currency markets. Sweden was up only 0.51% and Denmark up only 0.60% in local terms.

The J.P. Morgan Government Bond Index is the most widely-used measure of performance of leading government bond markets. The indices measure the total, principal, and interest returns in each market and can be reported in 18 different currencies. By including only traded issues, the Index provides a realistic measure of market performance for international investors. Information about the J.P. Morgan Government Bond Index is also available on the Internet (http://www.jpmorgan.com). -0-