FINSUM + Magnifi: Goldman Sachs says High-Yield Bonds are Income Investors' Fixed Income Solution

April 13, 2021

The recovery has boosted the junk bond market as investors saw investment-grade bonds and government debt perform poorly in Q1. All but 10% of high yield debt is within five percentage points of Treasuries. This has put a squeeze on the possibilities of the return in the high yield market but it's the only fixed income market with any possibility of gains. But Goldman sees junk bonds going higher despite this, and that a growing economy with additional stimulus should provide an environment that produces good returns for more risky corporations. Additionally, junk bonds are uncorrelated with Treasuries and aren’t a hedge but diverse in a portfolio with
investment-grade and government debt.

Read more


FINSUM + Magnifi: This Sector Poised for Strong Yields

(October 2020)

 
Yields in the US are paltry, there is little other way to characterize it. Junk bonds even have weak yields, and the risk-return profile for many areas of US fixed income look quite poor. So where should investors look? According to UBS, the answer is emerging market debt. From Turkey to East Asia, yields are much stronger than in the US, and risks—especially in China—look lesser. According to Morgan Stanley, “China was the first country to enter the Covid-19 crisis and appears poised to be the first out. Resumption of economic activity during the second quarter should jump-start global growth, especially given huge government stimulus programs”. Yields on Chinese junk range from 7.7% to 8.4% across the sovereign and corporate spaces.
Read more