For instance, in Europe, Spanish bond yields continue to fall, with the yield on 10-year sovereign debt breaking below 3% last week. Canada, one of the few AAA rated sovereigns left, sold 50-year bonds at less than 3%. And in the United States, $12 billion of new bonds issued by Apple Inc. garnered $40 billion in offers.
In my opinion, investors may be stretching too far for income for yield and ignoring risk. While there are few bargains within fixed income, I continue to like those parts of the market that offer some relative value, including tax-exempt bonds and mortgage-backed securities. In addition, for more yield hungry investors, I’d advocate some exposure to U.S. high yield. You can read more about my fixed income outlooks in my latest Investment Directions monthly market commentary.
Sources: Bloomberg, BlackRock Research
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.