Investors shun high-yield bonds on recession, banking risks
Global investors have resumed their selling of high-yield corporate bonds after a brief respite in January, as fears over the health of smaller banks add to risk aversion driven by worries over rising interest rates, recession and defaults.
Concerns have been heightened by the wild swings in market interest rates since the collapse of Silicon Valley Bank (SIVB.O) last week.
Fund managers advise shunning high-yield bonds, despite their attractive yields, because of the risk these bonds could be hit by ratings downgrades, defaults and a squeeze in company earnings.
“Market concerns are elevated, given the uncertainty of a recession this year, the path of inflation, and most recently, the collapse of Silicon Valley Bank,” said Jim Smigiel, chief investment officer (CIO) at investment firm SEI.
“Given the volatility of the past few days and the still unfolding situation within financials, the turmoil in the banking sector could certainly increase outflows and further test the system.”
This report’s information was first seen on REUTERS; to read more, click this link.
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