European corporate bonds have snapped back after a quick Brexit selloff. Ira Jersey, senior client portfolio manager on the Oppenheimer International Bond Fund , said uncertain investors still sitting on the sidelines should not think twice about getting back in. ‘A lot of the issuers in Europe are multi-national issuers,’ said Jersey. ‘They have diversified portfolios of businesses so their revenues and sales probably won’t be that impacted by Brexit itself. The Oppenheimer International Bond Fund is up 11% thus far in 2016, according to Morningstar. The $6.2 billion fund has returned an average of 2.5% annually over the past three years, outpacing 59% of its rivals in Morningstar’s world bond category. The fund sports a 3.2% trailing twelve month yield, according to Morningstar. In terms of sectors, he is bullish on European banks which have improved balance sheets and replenished capital. He also likes the bonds of European auto manufacturers as pent-up demand and low global yields should benefit sales. In emerging markets Jersey is a fan of state-owned oil and gas companies. In his view, governments are providing support for deleveraging these firms through asset sales and lower government spending, which should help improve credit profiles. In sovereign bonds, Jersey said he continues to see opportunities as many of the Latin American countries appear close to the end of their hiking cycles which they began about a year ago, while some high yielding Asian countries are opening the door for further rate cuts. He said he remains cautious on Turkey and to a lesser extent South Africa for both fundamental and political reasons. Elsewhere, he is looking for opportunities in Brazilian rates where the central bank is likely to cut interest rates. In emerging market local rates, India and Brazil are his duration biggest overweights, while he is underweight Malaysia, South Africa, Thailand and Turkey.
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