Thomas De fauw

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.

Emerging market debt denominated in local currencies enjoyed a strong year last year, but the first quarter of 2024 saw hardly any movement. For investors looking for diversification, we discuss a leading fund in this category. 

Last week, my colleague Ronald van Genderen covered stocks from emerging markets and their underperformance compared to developed nations over the short and long term. Indeed, this asset class has failed to live up to the high expectations set after a strong period in the early 2000s. 

2023 was a year that high-yield bond investors won’t soon forget. It was a period marked by a spirited comeback, with global high-yield bonds extending their rally, clocking a 3.1% gain in Q4 and culminating in a robust 9.6% total return for the year, as per the ICE BofA Global High Yield Constrained Index.

The 60/40 portfolio has been besieged on all sides since bonds failed to protect against the correction in equities last year. Many see salvation in alternative assets, while others preach flexible allocation. 

Despite the veritable stock market crash in Vietnam last year, Southeast Asian equities kept their heads above water. This was mainly due to the positive performance of Thai and Indonesian stocks. For future performance, eyes are on the direction of the dollar, the positioning of global investors, as well as the global economic outlook.