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Financial Industry Insights from Advisors Asset Management
On April 08, 2014
Viewpoints from AAM - Seeking the Sweet Spot in Global Investment Grade Corporates
opportunity in the high quality world of global investment grade (ig) corporate bonds may be found today not at an obscure point on a map but at a place along the yield curve.
our analysis has found that, since the start of 2012, the j.p. morgan u.s. liquid index has demonstrated an above-normal spread advantage – i.e. a greater-than-normal difference in interest rates – for investment-grade corporate bonds maturing in seven years over those maturing in five years. (that spread advantage did not extend to the 10-year: the 7-10-year curve was relatively flat.) although past performance cannot guarantee future results, we think that the potential for additional spread at this point along the curve may provide investors with enough incentive to extend the duration of their portfolios out to a select group of those 7-year ig credit bonds.
and as we anticipate investment-grade spreads should remain range-bound (when a market, or the value of a particular stock, bond, commodity or currency, moves within a relatively tight range for a certain period of time), we believe that certain opportunities in global ig corporate bonds may continue to reward investors over time. there is potential that these bonds’ yields will likely continue to be higher. when these bonds reach a duration of three years, we think their yield will likely still be greater than the yield offered on new issue 3-year ig corporate bonds at that time.
what could this opportunity mean for investors? global ig credit bonds could potentially be a fit for those seeking higher yields in the high quality portion of their bond-investment portfolios.
the views expressed in this commentary are not necessarily that of aam.
this commentary is for informational purposes only. all investments are subject to risk and past performance is no guarantee of future results. please see the disclosures webpage for additional risk information at www.aamlive.com/blog/about/disclosures. for additional commentary or financial resources, please visit www.aamlive.com
investment risks: all investments involve risk, including loss of principal. fixed income investments are subject to credit and interest rate risk. investments in foreign securities, including emerging markets, involve risks beyond those inherent in solely domestic investments.
This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit www.aamlive.com.
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