A lot has changed since the launch of our last Recommended Bonds Report. Investors were facing the rapid outbreak of Covid-19 infections across the world, followed by an unprecedented global response to the pandemic via swift lockdowns and border closures, as well as the uncertainties of the US presidential election held amidst a recession year. It has undoubtedly been a challenging period for many of our investors.
Fast forward 6 months later, things have fortunately taken a major turn for the better. While new Covid-19 cases are still on the rise globally, we are ushering in the new year with a transition towards a Biden-led US administration (potentially with a less erratic foreign policy), a global roll out of Covid-19 vaccines and more importantly, a synchronised global economic recovery spurred on by the record level of monetary and fiscal stimulus implemented worldwide across 2020.
Even as we start the year with a more positive overtone, various risk factors could still rear their ugly heads: an emergence of a more contagious variant of the virus, economic scarring from the prolonged travel restrictions, possible re-escalation of geopolitical conflicts, etc. Against such a backdrop, governments and central banks will likely be compelled to maintain a supportive policy stance (i.e. low interest rates, higher fiscal spending) to fuel the recovery in their respective economies for the rest of 2021.
What Should Bond Investors Look Out for in 2021?
With interest rates set to remain painfully low, many bond investors (including ourselves) will be on an aggressive search for returns in the risker high yield (HY) segments in 2021; partly driven by the rising risk appetite as well as the improving economic and credit fundamentals of corporate bonds.
Asian corporate bonds (particularly the HY credits) is one segment that we continue to believe yield-seeking investors should pay greater attention to looking ahead.
From a valuation standpoint, bond yields of Asian corporate issuers stand out. Option-adjusted credit spreads on Asian high-yield bonds, measuring the compensation for their credit risk, are at one standard deviation above the mean, albeit lower than the peak in March 2020, when it was at around three standard deviations above the mean. In this regard, we think Asian high yield bonds are relatively more attractive than European or US high yield bonds, where spreads are already below their respective means.
While Asian investment-grade bonds are likely to continue to perform well due to the broader improvement in risk appetite and demand for good quality assets, investing in higher-yielding bonds come with their own unique set of risks. With China bond defaults totalling to a record of over USD 25 billion last year [1] , concerns over a looming debt crisis in Asia could easily scare away any ill-informed investor – potentially missing out on attractive investment opportunities.
Investing in bonds in 2021 will be a delicate balancing act of maximising rewards and minimising risks – the latter can be achieved via educated bets and a careful selection of bonds in one’s portfolio.
Hence, we have specially crafted the latest edition of our semi-annual Recommended Bonds Report to assist investors in such an endeavour.
What’s new in our 1H 2021 Recommended Bonds Report?
We are delighted to inform investors that our long-awaited 1H 2021 Recommended Bonds Report is finally out now!
In the report, we have penned down our thoughts on the new year, our key insights across geographical bond markets and credit segments, as well as bond recommendations that our credit research analysts have handpicked to help you build a well-balanced bond portfolio for the year ahead.
That’s not all! Our latest 1H 2021 Recommended Bonds Report also offers a comprehensive analysis of 117 bonds from 55 issuers spanning sectors such as real estate, insurance, financial services, hospitality, aviation and beverages.
2020 has taught us the importance of staying disciplined in investing, even amid a global health crisis that has brought many economies to their knees.
While the challenging environment of low yields and heighted uncertainty are likely to persist ahead, staying well-informed and disciplined in managing one’s portfolio can go a long way in improving total return on your bond investments.
Your first step? Check out our 1H 2021 Recommended Bond Report available now: https://www.bondsupermart.com/bsm/recommended-bonds
[1] Source: https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-debt-fears-grow-amid-wave-of-corporate-defaults