Thomas De fauw

Local currency bonds have lagged this year, but expected interest rate cuts by the Fed have investors in emerging markets hoping for better times.

Investors are spotting opportunities in defence companies, particularly given the continued military support for Ukraine and significant increases in European defence budgets. Long-term revenue prospects appear stable, driven by the ongoing maintenance of military equipment and the need to replenish supplies.

Trackers and index funds are the logical choice for investing in US government bonds. Indeed, within long-term dollar bonds, the scope for active management is limited.

The fortunes of corporate bonds seem heavily reliant on a ‘soft landing’ scenario, given the tight spreads. However, recent history reminds us that spreads can easily double during a recession.

High-yield bonds remain in demand among investors whose main focus is on absolute returns, this week’s Morningstar Fund Radar shows.

Emerging market debt investors believe that the overvaluation of the US dollar is at relatively extreme levels, while growth in emerging markets is higher than in more developed markets.

European high-yield bond spreads narrowed in May, driven by strong corporate earnings and investor demand, reflecting robust market confidence and providing a favorable backdrop for corporate refinancing and new issues. This edition of the Morningstar Fund Radar shines the spotlight on the Robeco European High Yield Bonds fund.

Bonds issued by some of the world’s poorest countries have enjoyed a robust start to 2024, despite the backdrop of elevated US interest rates.

This week, we look at bond funds that can freely explore the entire fixed-income and currency universe in search of the best opportunities. Given that bonds, like other types of investments, can be a challenging asset class to predict, it might be a wise choice to let a team of experts decide how to position a portfolio.

The start of 2024 has unfurled a rather promising chapter for global high-yield bonds. While the allure of hefty initial yields continues to draw the investor’s gaze, the relatively narrow spreads hint at an underestimation of the lurking credit risks.