However, some analysts argue that investors could be shifting into riskier, speculative-grade debt as the improving U.S. economy will sap away the rally in safe fixed-income assets. [Investors Seek Riskier Debt, Jump into Junk Bond ETFs]
“We have a preference for high yield at the moment,” Rachel Golder, who manages high-yield bonds and loans at Goldman Sachs Asset Management, said in the WSj article. “We are bullish on the U.S. economy and think that rates will begin to steadily move up and investment grade is more vulnerable.”
Bank of America Merrill Lynch now expects investment grade bonds to generate a 1.5% overall return for 2014, compared to the 4% to 5% rise in high-yield bonds.
“The returns you are getting in investment grade are the best you are going to have this year,” Mark Pibl, head of high-yield strategy at broker-dealer Canaccord Genuity Inc., said in the WSJ article.
For more information on corporate debt, visit our corporate bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of LQD, HYG, and JNK.