Fund managers are bullish on the outlook for US high-yield corporate bonds, despite a lengthy rally — and some believe they could get a further boost from new US President Donald Trump, even as parts of the market look overheated.
The so-called ‘spread’, or premium over US Treasuries, offered by high-yield or junk-rated bonds has fallen from nearly 6 percentage points in July 2022 to about 2.6 percentage points this month, according to data from Ice. And the narrowing has been driven by investors clamouring for yield.
That leaves spreads well below the long-term average of 5.26 percentage points, according to Bank of America calculations based on Ice data, and close to levels seen in 2007 — shortly before the global financial crisis.
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