JPM_logo_Eng
  • Funds

    Fund Listing

    • Fund Explorer
    • Fund Distribution
    • Fund Documents

    Featured Funds

    • Multi Income Fund
    • Asian Total Return Bond Fund
    • China Bond Opportunities Fund
    • Income Fund
    • Provident Funds
  • Insights

    Market Insights

    • Market Insights Overview
    • Guide to the Markets
    • Weekly Market Recap
    • On the Minds of Investors
    • Multimedia

    Retirement Insights

    • Retirement Insights Overview
    • Principles for a Successful Retirement
    • Building Better Retirement Portfolios
    • Are you letting volatility derail your retirement plan?
  • Investment Ideas
    • Managing Volatility
    • Growth Strategy
    • Income Strategy
    • Retirement and long-term investing
  • Personal Investing

    Knowing the Basics

    • Retirement Planning
    • Investing for Your Children’s Future
    • Ways to Diversify Your Portfolio
    • Mutual Funds 101

    Getting Started

    • Start Investing
    • Investment Ideas
    • Regular Savings Plan
    • eTrading Privileges
    • Open an Account Online with Ease
  • Retirement Services
    • ORSO Services
    • MPF Services
    • Retirement Fund Centre
  • Resources
    • About Us
    • Awards
    • Contact Us
    • Announcements
    • Forms & Literature
    • Investment Return Calculator
  • Library
Skip to main content
  • Language
    • English
    • 中文/ Chinese
  • Role
  • Country
  • eTrading Login
Search
Menu
CLOSE
Search
  1. Home
  2. Insights
  3. Investment Ideas
  4. Building a stronger income portfolio as rates stay low

  • Print
  • Actions

  • Print

Building a stronger income portfolio as rates stay low

Oct 2020 (3-minute read)

J.P. Morgan Asset Management

Key takeaways:

  • Global central banks’ unprecedented stimulus and asset purchases have been providing much liquidity support to the fixed income market.

  • The fixed income universe comprises diverse sectors which are affected by various risk factors, and hence perform differently.

  • A diversified fixed income strategy integrating traditional and extended fixed income sectors can help broaden income and return potential while managing portfolio volatility. Mortgage-backed securities (MBS) and asset-backed securities (ABS) are common examples of extended fixed income sectors.

As the global economy is gradually recovering from the fallout of the global public health crisis, interest rates are expected to stay low for longer to sustain economic activities. Currently, the search of income could be likened to a triathlon, and adopting a consistent yet flexible investment approach is essential.


Liquidity support


After the onset of the global public health crisis and the financial market lows in March, global central banks and governments have responded with monetary and fiscal policies that are unprecedented in size, timing and coordination.

The amount of US Treasury purchased by the Federal Reserve between mid-March 2020 and mid-June 2020 accounted for about 8% of American gross domestic product, the highest share ever since the US rolled out the first round of quantitative easing during the global financial crisis in 20081.

Winners rotate2

US Treasury stood out among major fixed income sectors in the first quarter of 2020 with a return of 8.2%, followed by developed market government bonds which returned 3.1%.

In addition to traditional US Treasury and government bonds, there are also other riskier fixed income assets that could offer relatively attractive yield and return opportunities.

High-yield (HY) corporate bonds3, for example, underperformed in the first quarter after a liquidity crisis. But in the third quarter, European HY bonds took the top spot from US Treasury with a return of 7.1% as market sentiment stabilised. Other HY sectors also rebounded in the second quarter with US HY and Asia HY ranked second and third, respectively.
 

2. Source: Barclays, Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Based on Bloomberg Barclays US Aggregate Credit – Corporate High Yield Index (US HY), Bloomberg Barclays US Aggregate Credit – Corporate Investment Grade Index (US IG), J.P. Morgan Government Bond Index – EM Global (GBI-EM) (Local EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asian Bond), Bloomberg Barclays Pan European High Yield (Europe HY), J.P. Morgan Government Bond Index – Global Traded (DM Government Bond), J.P. Morgan Asia Credit High Yield Index (Asia HY), Bloomberg Barclays Global U.S. Treasury – Bills (3-5 years) (US Treasury) and Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). Past performance is not a reliable indicator of current and future results. Yield is not guaranteed. Positive yield does not imply positive return. Data reflect most recently available as of 30.09.2020.

Low correlation drives diversification


The fixed income universe comprises diverse sectors, and their performance could vary as different factors come into play, including interest rate risk, credit risk, sovereign risk and liquidity risk.

Extended fixed income sectors such as MBS and ABS have underlying assets which are mostly loans extended to individuals, setting them apart from corporate bonds which are closely tied to company balance sheets. As MBS and ABS are tapping into the balance sheets of consumers, these extended sectors have lower correlation to corporate bonds.

A diversified fixed income strategy investing across sectors with lower or negative correlation could help broaden income and return potential while managing portfolio volatility.


Yields and correlations of fixed income sectors4

4. Source: Barclays, Bloomberg Finance L.P., FactSet, ICE BofAMerrill Lynch, J.P. Morgan Economics Research, MSCI, J.P. Morgan Asset Management. Based on Bloomberg Barclays US Treasury (UST) Bellwether 10y (10y UST), Bloomberg Barclays US Credit – Investment Grade & High Yield (US IG & HY), Bloomberg Barclays US Securitised: ABS Index (US ABS), Bloomberg Barclays US Aggregate Securitised – Mortgage-Backed Securities (US MBS), Bloomberg Barclays Pan-European High Yield (Europe HY), J.P. Morgan GBI-EM Global (Local EMD), J.P. Morgan EMBI Global (USD EMD), J.P. Morgan Asia Credit (JACI) (USD Asia Credit), J.P. Morgan Asia Credit (JACI) – High Yield (USD Asia HY), J.P. Morgan Asia Credit China Index (USD China offshore credit), J.P. Morgan CEMBI (USD EMD corporates), J.P. Morgan Asia Diversified (JADE) (Local Asia). *Correlations are based on 10-years of monthly returns. Yield is not guaranteed. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results. Data reflect most recently available as of 30.09.2020.

J.P. Morgan Asset Management

A broad-based strategy expands income potential

J.P. Morgan Asset Management

Focus on Asian bonds for compelling income opportunities

J.P. Morgan Asset Management

A global portfolio with a focus on quality

Seeking yield as rates stay low5
 

  1. Keep quality in mind
     
    • A focus on quality is key for bond selection in uncertain times.

    • Adopting a bottom-up approach to find corporate bonds that are backed by stronger balance sheets, and able to operate through a downturn.
       
  2. Invest flexibly across the full fixed income spectrum
     
    • Tapping into multiple fixed income sectors that are less correlated to each other could help minimise income fluctuation. For example, extended fixed income sectors such as ABS and MBS demonstrate relatively lower correlation to HY bonds.

Conclusion
 

In uncertain times, adopting a diversified fixed income approach that integrates traditional and extended fixed income sectors could help broaden income and return opportunities while managing portfolio volatility.

J.P. Morgan Asset Management

Light up your income potential

J.P. Morgan Asset Management

Diversify your portfolio with Growth Strategies

J.P. Morgan Asset Management

Click here to explore more Investment Ideas

Subscribe to our e-Newsletter

Provided for information only based on market conditions as of date of publication, not to be construed as investment recommendation or advice. Forecasts/ estimates may or may not come to pass.

Diversification does not guarantee investment return and does not eliminate the risk of loss. Risk management does not imply elimination of risk. Yield is not guaranteed. Positive yield does not imply positive return.

1. Source: J.P. Morgan. Data as of 19.06.2020.
3. High-yield credit refers to corporate bonds which are given ratings below investment grade and are deemed to have a higher risk of default. For illustrative purposes only, exact allocation of portfolio depends on each individual’s circumstances and market conditions. Yield is not guaranteed. Positive yield does not imply positive return.
5. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.

Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current or future results. Please refer to the offering document(s) for details, including the risk factors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not to be taken as or construed as investment advice. Estimates, assumptions and projections are provided for information only and may or may not come to pass. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited.

OUR FOCUS FUNDS

Fixed Income

  • JPMorgan Asian Total Return Bond Fund
  • JPMorgan Funds - China Bond Opportunities Fund
  • JPMorgan Funds – Income Fund
  • JPMorgan Global Bond Fund

Equity

  • JPMorgan Asia Growth Fund
  • JPMorgan China A-Share Opportunities Fund
  • JPMorgan China Pioneer A-Share Fund
  • JPMorgan Funds - US Technology Fund

Asset Allocation

  • JPMorgan Multi Balanced Fund
  • JPMorgan Multi Income Fund
See all funds

RELATED ARTICLES

How variety could be the spice of long-term investing

Investors could rarely achieve their investment goals by focusing on just one asset. Find out why.

Read more

Emerging markets springing into action in multi-income

Emerging markets are emerging in multi-income portfolios as the US dollar weakens and consumer demand rises.

Read more

A vaccine boost that’s extending recovery in Asia

Growth potentials have emerged in select sectors as vaccines are distributed across Asia.

Read more

Dividend stocks are back on multi-income investors’ radar

Dividend stocks have largely been on the sidelines in 2020 but relatively attractive opportunities are emerging in 2021.

Read more

Recovering Asia: seeking long-term sector opportunities

Where are the growth opportunities in Asia as economies recover from coordinated monetary and fiscal support?

Read more

A multi-income journey into the emerging high-yield potential

Income investors like us have stayed the course as we ride through the four seasons. Where do we see income opportunities?

Read more

What’s trending in China’s equity markets?

As the year begins, consider a 2021 list of China A-share ideas as you devise a plan for your investment portfolio?

Read more

Curious about income investing? We share 4 FAQs

How much do you know about income investing amid an evolving market environment?

Read more

Outlook 2021: portfolio positioning with ‘G.P.S.’

Uneven recoveries in 2021 would imply the need for more active management.

Read more

Year ahead 2021: seeking clarity amid macro uncertainty

As market volatility could persist in 2021, how can investors cut through the fog of uncertainty?

Read more

Outlook 2021: investment themes in a ‘new normal’

How a ‘new normal’ could shape investing in equities, fixed income and multi-asset solutions.

Read more

Keeping a longer investment horizon as events unfold in China and the US

What are the investment implications of China’s new economic blueprint and the US elections?

Read more

Finding growth: there’s still more to know about Asia

We share our views on how the public health crisis has accelerated some structural growth trends in Asia.

Read more

Finding growth: how a consumer’s routine can spark investing ideas

We share our perspectives on potential opportunities arising from evolving consumer behaviours.

Read more

Finding growth: it’s a digital revolution

We share our perspectives on riding the wave for future growth in tech investing.

Read more

What’s ahead for investing as Election Day approaches

With less than a month to go before the US elections, we look at the investment implications for 5 major economic sectors.

Read more

Recovering economy, reinforcing Chinese equity opportunities

Looking at China’s economic recovery and the beneficiaries in the long term.

Read more

Risks and potential opportunities for bonds in 4Q 2020

The potential opportunities and risks in bonds in the last stretch of 2020.

Read more

Securitisation 101: making optimal use of securitised debt

Let's explore the role securitised debt could play in an investment portfolio.

Read more

Why some investors are still investing in equities

Understand stock valuations for clues to potential opportunities in a market rally.

Read more

Recovering economy, recovering Chinese property bond demand

As China’s property market recovers, capture income potential of Chinese property bonds with a diversified Asian bond strategy.

Read more

What do the As and Bs in bond credit ratings mean for investors

Understand bond credit rating and broaden potential income opportunities.

Read more

Is the Fed’s new framework a boon for Asia?

With the Fed’s new policy framework, where do we see opportunities in Asia?

Read more

Activating Asia’s bond potential with a dynamic approach

Actively manage local currency opportunities in an Asian bond portfolio.

Read more

What a weak US dollar could mean for a portfolio

Seeking investment opportunities as the US dollar weakens.

Read more

Asia’s bond markets = one region + multiple income options

Asia’s bond markets have grown significantly over the past decade, spanning a diverse range that offers investors more fixed income options.

Read more

Seeking quality growth potential in China A-Shares

Our portfolio manager shares her views on potential quality growth and A-Shares as China enters a new normal.

Read more

It’s three-in-a-row: Asian bonds in a portfolio

Income opportunties can still be found in Asia’s bond markets amid low rates as they are supported by these three factors.

Read more

Asian bonds: there’s still more to know

The Asian bond market has grown significantly in the past decade. Explore the abundant opportunities.

Read more

Chinese bonds: what, why and how

In the zero interest rate era, what are the income opportunities in Chinese bonds?

Read more

Growth in focus: finding the ace among A-Shares

Amid China’s long-term structural growth trends, which are the sectors that could stand out in the A-Share market?

Read more

3, 2, 1 – getting ready to invest in Chinese bonds

Expand your sources of income by considering the potential opportunities in Chinese bonds.

Read more

Unlocking long-term growth potential in Asia

Structural growth trends in Asia remain intact amid the pandemic and some have actually been accelerated.

Read more

Navigating Chinese bonds with versatility

As the search for income gets tougher, consider the world of Chinese bonds to diversify your income opportunity set.

Read more

Riding through the highs and lows with global dividend opportunities

Striving to optimise potential equity income opportunities as markets recover.

Read more

Scenarios of an expected global economic recovery

We describe three case scenarios for economic recovery after the pandemic subsides.

Read more

Making the most of bond opportunities as the pandemic subsides

Positioning to tap bond market opportunities as economies reboot as the pandemic subsides.

Read more

Positioning for yield in time for a global restart

As liquidity conditions improved, our portfolio manager shares how we are positioned for income opportunities across asset classes.

Read more

Emerging trends set in motion for US technology

US technology sector looks set to benefit from emerging trends driven by the pandemic.

Read more

Income Strategy Q&A: focusing on long-term value proposition

Our income strategy portfolio manager shares how he looks through the headlines and focuses on the long term.

Read more

China Q&A: finding quality A-shares in volatile markets

China’s long-term structural trends such as consumption upgrades, domestic technology and healthcare innovation are expected to remain intact amid the pandemic.

Read more

Multi-asset income strategies in unique times

As the search for quality income gets challenging, a diversified multi-asset income solution could be considered to broaden income potential.

Read more

2Q 2020 bonds: weathering a market storm

Diversifying across fixed income, with a quality tilt, could help build portfolio resilience.

Read more

Taking steps to stay on top of volatility

A diversified portfolio with a defensive bias could help build portfolio resilience while seeking yield opportunities.

Read more

Focus Q&A: how tech stocks in APAC are faring

The limited impact of COVID-19 on APAC’s technology industry chain in the medium to long term.

Read more

Adding a fitting pace to your income portfolio

Diversify your income sources to help navigate uncertain markets.

Read more

Fixed income investing in uncertain times

Investing across multiple fixed income sectors could help navigate uncertain markets and seek yield in fixed income.

Read more

Repositioning for income potential in uncertain times

Our multi-asset fund manager shares how he repositions for income in uncertain times.

Read more

Some investing dos and don’ts when markets are volatile

Some investing ‘dos & don’ts’ as you navigate market volatility in uncertain times.

Read more

Investing during the COVID-19 outbreak: 4 topmost concerns

As COVID-19 continues to evolve, our strategists share 4 topmost concerns among Asia’s investors.

Read more

China’s fundamentals signal resilience despite health crisis

China’s economic fundamentals remain resilient as the country races to contain an evolving health crisis.

Read more

The little red envelope savings guide

As you welcome the Year of the Rat, plan to make your “lucky money” work harder for you.

Read more

Aiming high when yield stays low

Yield can still be found in a low rate environment but requires moving along the risk spectrum.

Read more

1Q 2020 bonds: where we see opportunities

Time to reposition fixed income as the economy bottoms out and recession risk wanes.

Read more

Investing in a world of ultra-low rates

Lower returns from bonds could pose a challenge to long-term investors.

Read more

Securitisation 101: What are ABS and MBS?

Fixed income isn’t just government or corporate bonds, it also includes non-traditional debt securities.

Read more

Securitisation: Then and now

The securitisation market has regained much ground in the past decade.

Read more

The secret to effective diversification

Diversification sounds easy, but how to do it effectively?

Read more
lets-solve-it-logo

Feel free to call our InvestorLine or email us if you would like further information about our Funds or eTrading services:

(852) 2265 1188

investor.services@jpmorgan.com

J.P. Morgan Asset Management

  • Terms of Use
  • Privacy Statement
  • Cookies Policy
  • Investment Stewardship
  • Fund Notes
  • Offering Document(s)
  • Forms & Literature
  • Guide to Using This Website
  • Sitemap
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase

The information contained herein is intended only for use by Hong Kong residents. By using this information, you are representing and warranting that you are either residing in Hong Kong or the applicable laws and regulations of your jurisdiction allow you to access the information, and you confirm that you accept the Terms of Use as set out in https://am.jpmorgan.com/hk/. Investment involves risk. Past performance is not indicative of future performance. In particular, funds which are invested in emerging markets and smaller companies may involve a higher degree of risk and are usually more sensitive to price movements. Investors should carefully read and consider the fund offering document(s), which contain details on investment objectives, risk factors, charges and expenses of the fund, before making any investment decisions. Investors should read carefully the fund notes before making any investment decisions. Information in this website does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service, nor a distribution of information for any such purpose. Opinions and statements of financial market trends set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Investors should conduct their own verification. The views and strategies described may not be suitable for all investors. This website and the advertisements contained herein are issued by JPMorgan Funds (Asia) Limited. This website has not been reviewed by the Securities and Futures Commission of Hong Kong ("SFC"), with the exception of material relating to the JPMorgan Provident Plan that the SFC has pre-approved (however such pre-approval does not imply official recommendation by the SFC).

Copyright 2021 JPMorgan Funds (Asia) Limited. All rights reserved.