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  1. Portfolio Chart: A menu of options as bond yields reset higher

Portfolio Chart: A menu of options as bond yields reset higher

Aug 2023 (3-minute read)

J.P. Morgan Asset Management

A yield revival in fixed income

Starting yields have increased significantly across different fixed income sectors.

Source: Bloomberg, FactSet, J.P. Morgan Credit Research, J.P. Morgan Asset Management. Data as of 31.07.2023. US Treasuries: Bloomberg US Treasury Index; US MBS: Bloomberg US Mortgage-Backed Securities (MBS) Index; US ABS: Bloomberg Asset-Backed Securities Index; US IG: Bloomberg US Corporate Index; Global IG: Bloomberg Global Aggregate Corporate Index; Europe IG: Bloomberg Euro Aggregate Corporate Bond Index; Asia IG: J.P. Morgan Asian Credit Investment Grade Index; Europe HY: Bloomberg Pan European High Yield (HY) Index; US HY: Bloomberg US Corporate High Yield Bond Index; Asia HY: J.P. Morgan Asian Credit High Yield Index; Global HY: Bloomberg Global High Yield Index; Leveraged Loans: J.P. Morgan Leveraged Loan Index; Local Emerging Market Debt (EMD): J.P. Morgan GBI-EM Global Diversified Index; USD Asia Credit: J.P. Morgan Asia Credit Index (JACI); USD China Offshore Credit: J.P. Morgan Asia Credit China Index; USD EMD: J.P. Morgan Emerging Market Bond Index (EMBI) Global Diversified Index; EM Corporates (Corp): J.P. Morgan Corporate Emerging Market Bond Index (CEMBI) Broad Diversified Index. All sectors shown are yield-to-worst. Yield-to-worst is the lowest possible yield that can be received on a bond apart from the company defaulting. Past performance is not indicative of current or future results. Yield is not guaranteed. Positive yield does not imply positive return.
 

  • The significant repricing in fixed income markets has restored “income” to fixed income. As the chart highlights, valuations look relatively attractive across a broad range of fixed income sectors, with current bond yields close to decade highs and meaningfully above the past 10-year median.
  • This is a favourable outcome for two reasons. First, higher yields improve the availability of income, presenting opportunities for consistent cash flows that can be a steady source of return during periods of elevated volatility. It also creates room for yields to fall again (as bond prices increase) in the event of an economic downturn. On the flipside, it presents a reasonable buffer that can help cushion performance against future increases in interest rates or credit spread widening.
  • Second, higher starting yields typically translate to a relatively attractive risk-reward for bonds as yields historically account for a meaningful share of total return for the asset class over the long term.
     

Staying active with fixed income

  • Nevertheless, investors should remain prudent and avoid carelessly reaching for yield without understanding the underlying credit risks in higher yielding segments of the bond market such as emerging market bonds and high yield corporate debt1.
  • Rigorous bottom-up credit selection, thoughtful sector and regional diversification and active duration management are important to make the most of the wider fixed income opportunity set. This can help create more resilient fixed income portfolios that can weather uncertain economic conditions.

Capturing income opportunities from the ground up

Going far and wide for income solutions

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Staying the course with opportunities in fixed income

JPMorgan Income Fund

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Provided for information only based on market conditions as of date of publication, not to be construed as offer, investment recommendation or advice. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.

Diversification does not guarantee investment return and does not eliminate the risk of loss.

1. Investments in below investment grade or unrated debt securities, may be subject to higher liquidity risks and credit risks comparing with investment grade bonds, with an increased risk of loss of investment.Yield is not guaranteed. Positive yield does not imply positive return.

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service. Informational sources are considered reliable but you should conduct your own verification of information contained herein. Investment involves risk. Investments in funds are not deposits and are not considered as being comparable to deposits. Past performance is not indicative of future performance and investors may not get back the full or any part of the amount invested. Dividend distributions if any are not guaranteed and are made at the manager’s discretion. Fund’s net asset value may likely have high volatility due to its investment policies or portfolio management techniques. The value of the units in the scheme and the income accruing to the units, if any, may fall or rise. Funds which are invested in emerging markets, smaller companies and financial derivative instruments may also involve higher risks and are usually more sensitive to price movements. Any applicable currency hedging process may not give a precise hedge and there is no guarantee that any hedging will be successful. Investors in a currency hedged fund or share class may have exposure to currencies other than the currency of their fund or share class. Investors should make their own investigation or evaluation or seek independent advice prior to making any investment. Please refer to the Singapore Offering Documents (including the risk factors set out therein) and the relevant Product Highlights Sheet for details at https://am.jpmorgan.com/sg/en/asset-management/per/. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with https://am.jpmorgan.com/sg/en/asset-management/per/privacy-statement/. Issued by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K). All rights reserved.


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