- Fixed Income Portfolio Manager
- About Us
- My Account
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
The first quarter of 2022 proved to be challenging for most fixed income sectors, and convertible bonds were not immune from the volatility. Year to date through March 31, global convertibles had returned -5.81% — their third-worst quarterly showing since the 2008 global financial crisis — compared to -5.54% for global high-yield bonds and -6.90% for global investment-grade corporates.1 Sector composition particularly hurt global convertibles, including a sharp correction across technology (which makes up 23.8% of the convertibles universe) in response to concerns about the potential impact of higher interest rates on tech companies’ growth prospects; and a rally in the energy sector (4.0% of the convertibles universe), fueled in part by supply disruptions from the war in Ukraine.
Looking ahead, however, we continue to believe global convertibles are likely to outperform other fixed income sectors over an investment time horizon of approximately two to three years.
Our bullish secular outlook for global convertibles is based on five key considerations
The “bear case” risk factors that we’re watching most closely these days include:
However, it’s always possible that a severe economic shock could cause global central banks to delay their monetary policy tightening efforts or even reverse course on their planned interest-rate hikes, which would likely help alleviate the risk of a global recession.
Today’s uncertain landscape is not without potential risks for convertible bond investors to be mindful of, but as of this writing, we are cautiously optimistic on global convertibles’ performance prospects going forward. We will update our views if/as market conditions warrant in the months ahead.
1Asset classes are proxied by the following indices: Global convertibles: ICE BofA Global 300 Convertible Index; Global high yield: ICE BofA Global High Yield Index; Global investment-grade corporates: ICE BofA Global Corporate Index. Sources: Bloomberg, BofA Global Research. Data as of 31 March 2022. | 2Convexity is a measure of the curvature in the relationship between fixed income asset prices and their current yields, showing how a bond’s duration changes as its yield changes. For example, a bond is said to have positive convexity if its duration increases as its yield decreases. Positive convexity generally leads to greater increases in bond prices.
Three themes that could define 2023 for income investorsContinue reading
Spread the risk: Our top three fixed income diversifiers for 2023Continue reading
Can US bank loans “carry” investors through 2023?Continue reading
Take credit: Our five best credit market ideas for 2023Continue reading
Hidden in plain sight: Overlooked opportunities in investment-grade creditContinue reading
Credit market outlook: Partly sunny with a chance of good valueContinue reading
Three themes that could define 2023 for income investors
With several macro crosscurrents at play, Portfolio Manager Peter Wilke suggests that income-oriented investors not lose sight of the “big picture” in their quest for yield.
Spread the risk: Our top three fixed income diversifiers for 2023
Fixed Income Strategist Amar Reganti highlights three types of strategies that may be well positioned to provide fixed income portfolio diversification going forward.
Can US bank loans “carry” investors through 2023?
Fixed Income Portfolios managers Jeffrey Heuer, CFA and David Marshak and Investment Director Nick Leichtman describe what they see as the most prudent approach to the bank loans asset class in 2023 and why.
Take credit: Our five best credit market ideas for 2023
Fixed Income Strategist Amar Reganti highlights credit market opportunities that he expects to arise over the course of 2023, against a backdrop of slowing growth.
High yield: Opportunity to pivot in 2023?
Our high-yield bond portfolio managers have a guardedly optimistic outlook on the market and believe security selection will be key to benchmark-relative outperformance in 2023.
Hidden in plain sight: Overlooked opportunities in investment-grade credit
Fixed Income Strategist Amar Reganti and Investment Specialist Geoff Austein-Miller highlight some relatively simple, straightforward ways to implement a positive view on high-quality corporate credit.
How to find potential in volatile European high-yield markets?
Fixed Income Portfolio Manager Konstantin Leidman discusses why European high-yield investors need to be ready for both further volatility and the emergence of new opportunities.
High-yield bonds in 2023: Fortune favours the patient
Amid ongoing dislocation in the high-yield market, Fixed Income Portfolio Manager Konstantin Leidman sees opportunities for investors to take advantage of potentially attractive valuations.
Credit market outlook: Partly sunny with a chance of good value
In his 2023 credit market outlook, Fixed Income Portfolio Manager Rob Burn highlights some potentially attractive opportunities in the wake of this year's market sell-off.