High Yield Bonds Outperform Investment Grade Bonds

    JN Fund Managers
    JN Fund Managers

    The iShares Investment Grade Bond ETF, which tracks the US dollar-denominated high yield corporate bond market declined year to date by 4.39%. Despite rising eco-nomic uncertainty due to geopolitical and trade tensions, investment grade bonds have underperformed whilst high yield bonds have delivered higher risk adjusted re-turns for investors. Although investment grade bonds typically deliver higher returns relative to the riskier high yield bonds during periods of uncertainty and volatility, the strengthening US economy and rising interest rates in the United States (US) have impacted the demand for lower yield investment grade bonds. As we anticipate US interest rates to continue to trend higher in the short term, the outlook for high yield bonds remains favourable. However, Emerging Market high yield debt is likely to become less valuable to investors relative to US high yield bonds as they are able to receive higher returns with lower risk.

    JN Fund Managers

    Stocks, Bonds and venture Capital.

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