Best Bond Deals

Medium term valuations in credit appear very compelling. However, credit markets have yet to establish a clear bottom as policy makers struggle to contain the economic fallout from rampant de-leveraging, still falling house prices and limited demand for distressed assets.

Types of Bonds

• Overweight Investment Grade, Underweight High Yield. Deleveraging and high yields in a world of low nominal returns produce attractive risk-adjusted and relative return prospects for corporate bonds. We favour investment-grade credits at present but would look to extend into high-yield as the economic and financial environment stabilises.
• Underweight BBB cyclicals. Tight credit conditions and funding pressures are likely to weigh on levered companies that are vulnerable to a cyclical economic slowdown.
• Overweight more defensive sectors. Stable cash flows and limited financing requirements should continue to benefit Consumer Product, Healthcare, Defence, Telecom, Utility and Energy companies.
• Modest Financial sector overweight. Durable and comprehensive government support will likely result in substantial issuance, but also makes the sector more defensive relative to non-financials.
• Take advantage of the new issue calendar. In the early stages of a credit cycle, the strongest companies usually issue debt on favourable terms for investors. Additionally, the wide basis of cash bonds over CDS offers an added benefit.

Author Profile

The What Girl

I am a financial services writer with experience in forex trading and stock market analysis.

Latest entries

• Investment Ideas2013.08.14Stockmarket Shares: Tips for Beginners
• NewsWire2013.08.07New consumer protection laws target pressure sellers
• Best Deals2013.07.25Price rises spell trouble for UK’s crowded housing market
• NewsWire2013.07.01Money lenders welcomed into temple as Church of England plans credit union