Go High Yield for Bond Returns in 2017, says Schroders

Ditch US Treasuries in favour of high yield and emerging market bonds, says Schroder's Wesley Sparks - as rising inflation will put pressure on yields

Emma Wall 4 January, 2017 | 12:39AM
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In the weeks following Donald Trump’s election win the S&P 500 rallied by the same amount as US Treasuries sold off by; investor confidence was up, and risky assets benefited. Then followed the much expected interest rate rise by the Federal Reserve, and the 10 year Treasury yield climbed higher – from 1.83% the day before the election, to 2.6% by mid-December. It currently sits at 2.45%.

Thanks to Trump’s inflationary policy proposals, the pressure is on for the Fed to raise rates further in 2017, with the Federal Open Market Committee indicating they will raise rates three more times this year. It comes as no surprise therefore, to hear that Wesley Sparks, head of US Credit Strategies for Schroders, is dumping US government bonds in 2017 in favour of high yield bonds.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Schroder ISF Glbl Hi Yld S Acc EUR  

About Author

Emma Wall  is former Senior International Editor for Morningstar