The near-term prospects for a significant rise in inflation, which would push bond yields upward, are dim. But if inflation rises before real-return bonds (RRB) reach the middle of their term to maturity or beyond, they will be profitable; indeed, present prices for RRBs then will seem cheap. Investment in RRBs is a macroeconomic speculation […]
The increase stands in contrast to the corporate bond sector
However, the structure of corporate bond markets has shifted significantly in recent years due to several factors, IOSCO reports
U.S. speculative-grade companies continue to benefit from investors’ hunt for yield in a continued low interest rate environment
A big market shock could trigger a rush for cash as happened in the crisis of 2008
The historical trading data is intended to encourage academic research on bond markets
Fitch reports that investment managers expect macroeconomic market conditions to improve and that they’re forecasting low default rates in 2017
Although Moody’s reports there were 10 defaults in January, the global speculative-grade default rate should fall to 3% by the end of this year
Moody’s reports that speculative-grade debt now represents more than 60% of total corporate debt due in 2017-21
The path is risky, but rising interest rates and more liquidity in bond markets could see bonds delivering more "normal" returns