Battered Safe Credit Is Now a 'Screaming Buy' After Yield Jump
Comment of the Day

October 19 2022

Commentary by Eoin Treacy

Battered Safe Credit Is Now a 'Screaming Buy' After Yield Jump

This article from Bloomberg may be of interest to subscribers. Here is a section:

After historic losses this year, high-quality corporate debt has flipped the script to become one of the hottest asset classes in the market.

Investors are increasing allocations to investment-grade corporate bonds as the yield they can get just by holding the debt to maturity has reached its highest level since the global financial crisis. At 5.6%, global high-grade yields now exceed where junk-rated debt was trading at the start of the year, according to Bloomberg indexes.

It’s a major shift for the $10 trillion global high-grade market, which has suffered massive losses this year amid aggressive central bank rate hikes. The steep losses in investment-grade bonds, despite their near-zero probability of default, has created one of the most favorable entry points in years for some investors.

“High quality is a screaming buy,” said Eric Vanraes, head of fixed income investments at Banque Eric Sturdza SA. “The big difference between high yield and investment-grade is that in high yield you have to cope with default rates.”

Eoin Treacy's view

There is a point where higher yields will be a good buying opportunity in fixed income. To buy at today’s levels is certainly preferable to paying all-time highs and many investment managers have a mandate to hold some fixed income so they don’t have much choice.

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