Global Matters Weekly – Credit where credit’s due

Bonds remain expensive today, with yields across the ratings spectrum having tracked core rates lower. While core rates have lifted off their lows from last year (US 10 year yields got as low as 0.5% in August 20201), they remain unattractive at current levels. However, there remain areas of relative value within short duration high yield and dollar-denominated emerging market debt, as well as floating rate credit. Elsewhere, while there is limited upside from further spread compression, spreads are not at extremes, and hence there is no clear reason, from either a valuation or a fundamental perspective, why spreads should suddenly blow out. As a result, we retain meaningful allocations to those aforementioned areas of value, as well as some core investment grade credit.