A Big Bond Rout is Coming

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A Big Bond Rout is Coming

(New York)

Investors hang onto your hats, a big fixed income rout might be coming. While it was easy to write Italy's big bond losses off to its recent political crisis, the Wall Street Journal is arguing that all risky bonds may be in for a reckoning. There are a couple reasons. One is that just as in Italy's two-year bond, many fixed income securities may hit a "double bottom", which could lead to serious losses. But more fundamentally, many investors are now starting to view bonds higher up the quality spectrum more favorably, which means the market may suffer a significant "risk-off" period. Global high-yield bonds are down almost 4% already this year.

FINSUM : Our bigger worry than the points mentioned here is that as safer bonds start to get better yields from rising rates, there is less and less incentive to buy junk. That is a major change from the paradigm of the last few years.

  • bonds
  • Italy
  • double bottom
  • junk bonds
  • high yield
  • investment grade
  • credit

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Bonds

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