發掘固定收益的超額回報來源和多元化投資

As interest rates have moved higher, the fixed income asset class has been providing opportunities across a wide variety of sectors. I recently moderated a panel with fixed income portfolio managers to discuss options for investors to generate alpha as well as their outlook as we navigate through the end of the year and into 2024.

This panel discussion included Joshua Lohmeier, Portfolio Manager–Investment Grade, Franklin Templeton Fixed Income; Bill Zox, Portfolio Manager–High Yield, Brandywine Global; and Michael Buchanan, Co-Chief Investment Officer, Western Asset.

Here are my key takeaways from the discussion:

• US growth headed for a slowdown. From a US economic perspective, all the panelists agreed that we are headed into a slowdown of gross domestic product growth, and the market’s projection of an outright recession has diminished. The US Federal Reserve’s (Fed’s) policies have pointed the economy toward a “soft landing,” but historically this outcome has been very difficult to achieve. Any slowing of growth will come with some pain and will be reflected in both US Treasury (UST) yields and credit spreads. The path of short-term interest rates, dictated by a still hawkish Fed, has led the US economy to a fragile point of high volatility where economic news can cause large changes to yields on a day-by-day basis. These conditions will likely continue over the next several quarters as the Fed assesses the long and variable lags that policy changes will have on less interest-sensitive sectors of the economy.
• Continued strong corporate fundamentals. It was the consensus of the panelists that issuer fundamentals remain strong across the rating spectrum to support tighter credit spreads. Profit margins and revenues have been resilient as US economic growth and consumer spending continue to surprise on the upside. Additionally, corporate management teams took advantage of lower all-in yields available over the past several years to push back “maturity walls,” extending the period in which they will need to refinance debt and limiting the impact of rising rates on interest expenses for fixed-rate debt issuers. The benefits of extending maturities will be temporary as companies will still need to access capital markets in the future and be subject to prevailing interest rates at that time.
• The return of higher income. UST yields at multi-decade highs have returned the power of income to the fixed income market. A large inversion of the UST curve throughout most of the year provided higher short-term UST bill yields compared to intermediate-maturity corporate bonds. This trend has led to a “buy T-bills and chill” attitude with investors feeling no reason to take risks to enhance returns. Rising intermediate UST yields combined with corporate bond spreads are now attractive on both yield and income bases. These enhanced yields can be locked when the bond is held to maturity. Higher yields also provide a buffer to total returns in a scenario of continued rising UST yields or if credit spreads were to widen.

With regard to specific fixed income sectors, the panelists provided their thoughts on where they currently see investment opportunities in their specific markets:

• Josh Lohmeier – investment-grade (IG) corporate bonds
  • We prefer to stay neutral to beta (a measure of the volatility of a security compared to the market as a whole) and duration (a measure of a bond’s price sensitivity to interest-rate changes). IG corporate bond indexes have natural inefficiencies that can be taken advantage of when constructing a well-balanced portfolio. Downside risk mitigation and optimization of both roll (offers capital gains when yields roll down a steep credit spread curve over time) and carry (finding the most efficient place to earn yield and spread returns across sectors) should provide additional returns over the medium and long terms.
  • We remain up in credit quality, favoring sectors that demonstrate low spread volatility, including higher-quality utilities and pharmaceuticals.
  • In our analysis, UST bill yields remain attractive versus intermediate IG corporate bonds with maturities less than five years and provide sufficient dry powder to reinvest when market volatility reveals better entry points.  
• Bill Zox – high-yield corporate bonds
  • We are currently finding value in non-bank financials. As bank managements and their regulators and ratings agencies are focused more on liquidity and capital than growth, non-bank financials that compete with banks are facing less competition. This opportunity benefits non-bank consumer lenders and mortgage companies, among others.
  • Utilizing bottom-up credit research, we steer away from companies that we believe have a higher probability of default in the upcoming economic environment. In some cases, recovery levels for these companies will be low, which will compound losses following any adverse credit event.
  • We continue to provide liquidity to the market and are active in both buying and selling bonds. We seek to earn, rather than pay, bid/ask spread, all within the context of our price-to-value assessment and portfolio construction objectives.
• Michael Buchanan – private credit
  • Certain segments of the private credit market screen very attractive, in our opinion. Despite the tremendous growth in private credit over the last decade and a half, there remain some underserved areas of private credit that exist somewhere between the periphery of private and public credit. For example, smaller underwritten deals that can be overlooked by larger institutional investors can be priced attractively with strong collateral packages. We are also seeing some opportunities financing growth companies that pledge their intellectual property as collateral.
  • We are starting to see some value in certain parts of the commercial real estate market. This sector remains beaten down with negative headlines, leading to strong risk-off sentiment. As the sector deteriorates, we believe opportunities should arise. Using prudent bottom-up analysis of structures and underlying properties, we seek to identify attractive risk-adjusted returns that can withstand some volatility.

In summary, despite a slowing US economy, we believe higher overall yields make the fixed income asset class attractive on both yield and income bases. Careful analysis of sectors and issuers will be key in identifying investment opportunities in a volatile interest-rate environment. Prudent risk management should be central in constructing a well-balanced portfolio.