Fixed income
After the storm: seeking opportunities in bond markets
15 min read 3 Nov 22
Please find an investment update outlining the current opportunity we are finding in corporate bond markets.
Key takeaways
- Following a significant repricing in fixed income markets this year, corporate bond yields are trading at multi-year highs, while credit spreads are pricing in a severe recession. We believe this reflects an excessively gloomy outlook and that most companies should be well-placed to withstand even a protracted economic slowdown.
- For perhaps the first time in a decade, bond investors are being well paid, in our opinion, to take both credit and interest rate risk. The prospect of easing inflation and slowing growth should allow central banks to slow the pace of monetary tightening, which could provide a tailwind for bond markets next year.
- Recent market volatility has created significant dislocation in corporate bond prices. We believe this provides a rich source of opportunities for active managers, who can draw on their credit expertise to uncover attractive pockets of value.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.