Investors favour US investment grade bonds

A quarterly investor survey by NN Investment Partners (NNIP) has found that US investment grade is the most popular fixed income sector at present, although its popularity has fallen in the last quarter, from 39% to 28%.

Asked about other fixed income sectors for the quarterly survey, US high yield was the next most popular category, with 23% of investors seeing it as an attractive sector, followed by European high yield (22%), European investment grade (21%), emerging market corporate debt (14%) and EM hard currency debt and local currency debt. European peripheral bonds rose slightly in popularity from 4% to 6%. NNIP head of strategy, multi-asset, Valentijn van Niewenhuijzen, commented: “US investment grade remains an attractive asset class from a quality, spread and duration standpoint. Interest rate rises are an issue going forward but US IG bonds do offer income that is still attractive, especially to institutions that need to match their liabilities.

“US and European high yield debt are also seen as attractive. While the lack of liquidity in these funds has been an issue, investors have also been willing to take on additional credit exposure. There are still some significant opportunities to create value for those managers who can make the right assessments, especially regarding European high yield bonds, which offer attractive compensation as default rates are expected to remain low and spreads are at fair levels.”