With a record number of government bond yields in negative territory, fixed income investors might be forgiven for thinking their options are limited. But Nick Gartside, Portfolio Manager and International CIO of Global Fixed Income, believes there are plenty of good return opportunities for bond investors taking a flexible, unconstrained approach. Here, he talks us through five ideas he and his team think look attractive over the next 12 months.
1. Oil overspill: US high yield excluding energy
In an environment of very weak oil prices, worries about the ability of energy companies to repay their debts have pushed up the yields on US high yield bonds. Energy sector bonds are really a call on the oil price—and that’s a call we’re not prepared to make. But the rest of the US market has also suffered for the woes of the energy sector, and now offers some attractive yields. The risk is that increased numbers of companies default on their debt. But we think defaults outside the energy sector will stay low, given that we don’t expect a recession in the US in the next 12 months.
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