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Bond market fears could be an opportunity

High-quality US credit is beginning to entice yield-hungry investors
Bond market fears could be an opportunity
  • US investment grade corporate bonds are potentially good value
  • Underlying fundamentals could buy the Fed time to achieve its inflation mission

Corporate bonds yielding in the region of 5 per cent are starting to look a bargain, so long as investors are convinced of two things: 1) galloping inflation can be reined in; and 2) yields are overcompensating the true likelihood of companies defaulting in a recession.

Many private investors will leave bond market complexities for the professionals, but the read-through to shares is significant. “The bond market is like the equity market’s big brother, in both size and importance”, said Paul Hawkins, a former City corporate bond trader, now head of an eponymous asset management firm.

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