Bonds, Part 2: Corporate Debt Fundamentals Worsening

A couple days ago I emailed a commentary about how I’m managing clients’ bond sleeves. As a brief refresher, I’m avoiding high yield / junk bonds and over-weighting Treasury bonds relative to investment-grade corporate bonds. That commentary was very high level focused on the historical performance of each segment during times of economic and market stress. Today, I’m going to get a little deeper into the weeds.

Executive Summary:

  1. The credit quality of the investment-grade bond market is deteriorating
  2. Corporations have been piling on debt so leverage is at all-time highs
  3. High yield bond prices beginning to roll over

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