News Digest:

Notwithstanding the potential of widening spreads amidst recessionary fears in the United States, high-yield corporate bonds, specifically in the energy and core industries, could perform well during 2023, a new report says.

This could be a reflection of higher coupon incomes, which BondBloxx Investment Management says is a real possibility, given that it expects the expected corporate due to recession, to still remain below their long-term average. The dispersion of returns across industry sectors will remain elevated, creating opportunities for outperformance on certain sectors, it says.

Takeaway:

The BondBloxx 2023 Fixed Income Market Outlook says, reflecting the potential for a recession, we recommend investors overweight the higher quality segments of the credit rating spectrum, rated BB and single-B, and underweight CCC’s. Co-founder Joanna Gallegos even describes the single-Bs as the “Goldilocks of high yield” given their less rate-sensitive nature compared to the double-Bs and less idiosyncratic risks than triple-Cs.

End Notes

Source: https://www.etftrends.com/institutional-income-strategies-channel/high-yield-corporates-have-potential-to-outperform-in-2023/