Investment grade corporate bonds haven't escaped broader fixed income market turbulence, but the asset class could be among the leaders of a growing recovery. Rising bond yields have put fixed income back in vogue as an attractive Investment option, and with a variety of options to select from municipal or corporate bonds and Treasury bond funds, investors have a wide variety of options to choose from.
investors are gearing for more liability management to come from high grade corporate bond issuers next year, as bond prices remain well supported. This means that the risk of default is lower and more attractive to investors. Companies that have a history of paying their debt on time and have a strong balance sheet can be more attractive to investors.
For corporate bonds, and especially high yield bonds, this is still something to worry about over the next several quarters. Interest rates have been on the rise, which can put a strain on companies with high levels of debt. The higher debt levels can increase the risk of default, so investors should be cautious when selecting corporate bonds.
Indian government and corporate bond yields have been on an upswing through this year as the Reserve Bank of India went on a rate hiking spree. This has pushed the bond yields higher, making them more attractive to investors. In addition, the central bank has also reduced its exposure to corporate bonds, which has improved the liquidity of the market.
Looking into the different types of corporate bonds by default risk, the high-yield (HY) index remains just below the historical median, but the Investment grade corporate bonds (IG) index has been steadily rising since mid-2018. This is due to the low risk associated with these bonds, as the issuers have the lowest chance of defaulting on the debt.
Fijian Holdings Limited (FHL) listed its Wholesale Corporate bonds (WCB) on the South Pacific Stock Exchange (SPX) over-the-counter last week. The bonds feature an 8.5% coupon rate, which is attractive to investors compared to other bonds in the market. This is a sign of confidence for the issuer, as investors are willing to take the risk of investing in the bonds.
Funds focused on Investment grade euro-denominated corporate debt have seen sizeable inflows for four straight weeks, according to data from Refinitiv. This is a sign that investors are looking for a safe haven from the volatility of Stock markets. The funds offer a steady return and are seen as a safe bet for investors in the current market conditions.
Corporate bonds are debt securities issued by a corporation, as opposed to government-issued bonds like U.S. Treasurys. Unlike government bonds, which are backed by the full faith and credit of the government, corporate bonds are backed by the financial strength of the issuing corporation. This means that if the issuer defaults on its debt, the investor may not receive all the money they are owed.
When investing in corporate bonds, investors should consider the financial strength of the issuer, the coupon rate, and the risk of default. investors should also be aware of the liquidity of the market, as some corporate bonds may be difficult to trade. Ultimately, if the investor is comfortable with the risk, then corporate bonds can be a great way to diversify a portfolio and take advantage of potential gains in the bond market.
