NOVEMBER 21 (Reuters) – Investors are increasingly turning to U.S. corporate credit, which offers attractive valuations and yields after a sharp selloff in 2022, fund managers told Reuters Global Market Forum (GMF).
“We are at the beginning of the rotation as investors are back in credit,” said Salim Ramzi, global head of exchange-traded funds (ETFs). We re-evaluated the level,” he said. And index investing at BlackRock.
The iShares iBoxx Investment Grade Corporate Bond ETF (LQD.P) and iShares High Yield Corporate Bond ETF (HYG.P) are set to post quarterly gains of more than 3% in the fourth quarter after losing 20% and 14% respectively this year. .
“We don’t know exactly when inflation will peak, but I don’t think it’s a million miles away,” said Jim Leavis, chief investment officer for public debt at M&G Investments.
“If we are at this inflection point, the entry level we get from buying investment grade credit in[the US]looks very attractive.”
Rising bond yields, which are inversely proportional to prices, are also making corporate credit more attractive to income-seeking investors after years of low interest rates, Ramji said.
Yield spreads on the ICE BofA US Corporate Index (.MERC0A0) show investors want to hold corporate bonds over safe-haven Treasuries, but when they surged to 171 bps in October to 145 bps. over two years.
Both Leaviss and Ramji expect the Fed to be nearing the end of its rate-hiking cycle, with Leaviss saying default rates are still low, putting bond issuers relatively well-positioned to weather higher borrowing costs. He says it looks like there is.
“We’ve added risk where we’ve been shorting risk across bond portfolios,” Leavis said, adding that “good things are happening everywhere you look in the bond market right now.”
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Reporting by Lisa Pauline Matakal and Nishara Patikal from Bengaluru and Divya Chowdhury from Mumbai.Edited by Andrea Ricci
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