Morning Bond Update: Corporate bonds bull run set to march on
The present environment has been fertile for corporate bonds investors with the biggest risk factors out of the market or downscaled as themes. Subsequently, corporate bonds, especially high yield, have rallied. ITRX, XOVER, CDS, (credit spread indicator for high yield bonds) have broken the 2011 lows, indicating a strong performing European high-yield market.
We are also approaching levels where investors should be more selective in their portfolio, and aim for regions and sectors where value is still available.
Having said that, there is still sense in adding corporate bonds in equity-only portfolios, to obtain a more balanced risk approach as we discussed last month.
Investors who aim for partial profit-taking on record breaking equity portfolios should consider an allocation into corporate bonds.
—Edited by Martin O'Rourke