Higher Bond Yields Offer Opportunities

The report highlights opportunities in short-to-medium-tenor investment-grade corporate bonds amid over-aggressive central bank rate expectations. Investors are advised to maintain a selective, high-quality focus due to currently tight credit spreads.

Key Takeaways

• 1.Short-to-medium tenor (2-8 years) high-grade investment-grade bonds offer optimal value and carry.
• 2.Central bank rate hiking expectations by the market are considered over-aggressive; ECB is expected to hike, while Fed is likely to hold.
• 3.Sovereign debt affordability is a growing risk, with Japan and the US showing signs of funding stress.

Table of Contents

• Higher bond yields offer opportunities
• Aggressive central bank rate scenarios priced
• Selectivity matters: Spreads tighten amid hopes for peace deal
• Spreads fell on optimism about resolution to conflict
• Sovereign debt affordability strained by higher yields
• Sovereign debt outlook: Affordability matters
• Risk information

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