Reach for Yield Is Back in Vogue, PGIM's Collins Says

After the volatility-laden tumult seen towards the end of 2018, investors are starting to dip back into the high yield waters thanks to life in U.S. equities. Exchange-traded fund (ETF) flows are showing that a risk-on sentiment is slowly creeping back into the markets, making the case for high-yield bond funds again.

A volatile end to 2018 no doubt elicited a risk-off sentiment that permeated throughout the capital markets, but that could be changing as the stock market continues to rally. The aggregate one-month fund flows into high-yield bond funds are $4.58 billion as of the time of this writing.

In the current economic landscape, short-term bond funds are still receiving the majority of flows, but it’s hard to deny that a shift to high yield is becoming more apparent.

Per the Wall Street Journal, “Since Jan. 10, companies with below-investment-grade ratings, including TransDigm Group Inc. and Dun & Bradstreet Corp. , have sold around $50 billion of bonds and loans, breaking a dry spell that saw just $29 billion of speculative-grade debt sold in November and December, according to LCD, a unit of S&P Global Market Intelligence.”

In the video below, Rick Rieder, global fixed income chief investment officer at BlackRock, Michael Collins, senior portfolio manager at PGIM Fixed Income, and Oksana Aronov, alternative fixed income strategist at JPMorgan Asset Management, examine the investment grade and high yield credit markets. They speak with Bloomberg’s Johnathan Ferro on “Bloomberg Markets: The Open.”

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