Dan Ivascyn on Bond Investing in a Turbulent Global Market

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Text on screen: Daniel J. Ivascyn, Group Chief Investment Office

DAN IVASCYN: You mentioned a lot of volatility in equity markets and credit spreads have widened, a bit. Credit spreads have widened a bit. But you have very, very strong technicals, arguably still a little bit of complacency or supply demand imbalances. They're keeping spreads tight. That's an area which we may talk about more, but where we remain more cautious. But bonds, and I think it's important to put this into perspective, because the last few days have been rough.

But the ten-year Treasury yields back to the levels that we saw in mid-February. Just a few quarters ago, we had higher levels. And then the 30-year bonds retraced back to a level generally near where we were in January.

So it's been volatile. But we still have a situation where treasury yields, although they're high, they haven't become extremely dislocated yet. But again, that's an area that we're focusing on that you asked about the path for fixed income, as we've been saying time and time again. Yeah, it's rough. Yes, it can be a bumpy road.

But starting yields in the higher quality areas of the fixed income markets are attractive. Even if inflation were to be sustained comfortably above central bank targets. So this sell off has again created opportunity without having to lock up your money for an extended period of time, without having to take a lot of economically sensitive risk.

And again, it looks attractive absolute and relative to other segments of the market.

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All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed.

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