This year has been one wild ride on the bond market coaster. After a year of wild swings and turbulence, we have seen unprecedented highs and lows, most notably with the Barclays Global Aggregate Index recording its best and worst months ever by the end of February.
Investors have been flocking to the US investment-grade bonds, resulting in a positive inflow of $672 million year-to-date. This has been largely attributed to low yields, improving credit spreads, and a search for yield. In comparison to the prior year, we can see that the number of institutional buyers looking for a safe haven during 2020 has increased further this year.
In terms of investments, investors have been targeting corporate bonds, both in the US and internationally, preferring short-term debt to long-term debt as a result of the volatility in the markets. The overall change has been primarily driven by the fact that investors are now more strategic about their investments, taking into account both long-term and short-term market risks.
The search for yield, combined with intense volatility, has understandably caused quite a stir in the investment space. Though the market has been tumultuous, investors have had some great opportunities to buy low and sell high, depending on their risk tolerance. We saw this in both US high yield and US high-grade sectors.
While bonds may remain a tricky proposition, it looks like there is light at the end of the tunnel. With inflation expected to remain low and interest rates anticipated to stay at attractive levels, bonds may remain attractive investments going forward.
Overall, the bond markets have heated up, causing quite a stir among investors. Though it’s been a rollercoaster ride, investors have had the chance to take advantage of market swings and make strategic investments. With inflation and interest rates expected to stay low, bonds might remain an inviting asset class for investors taking a long-term approach.