As the global debt selloff deepens, T. Rowe Price Group Inc. is finding shorter-maturity bonds a safer bet amid expectations of a further rise in US Treasury yields and corporate defaults.
(Bloomberg) — As the global debt selloff deepens, T. Rowe Price Group Inc. is finding shorter-maturity bonds a safer bet amid expectations of a further rise in US Treasury yields and corporate defaults.
“We are finding opportunities in short-dated paper like both investment grade and high yield or securitized,” Saurabh Sud, senior portfolio manager, who manages about $15.6 billion in assets, said in an interview. While duration is expected to sell off, some shorter debt looks attractive, “where you can still generate high single digit or double digit yields, without taking a lot of credit or duration risk.”
Global bonds came under renewed pressure this week, with the US 10-year yield rising to 4.31% on Thursday. That took it to around three basis points away from last October’s peak, which was the highest since 2007. Treasuries have been a key driver of the global debt selloff as resilient US economic data dashed investor optimism that central banks will soon halt or start reversing interest-rate hikes.
“What I expect is we will make a new cycle high in the 10 year,” Sud said, referring to US Treasuries. “So, the October high was around 4.33%. I expect it to be breached.”
Here are other views from Sud:
- “We are doing credit work, it could be single Bs where, you know, we are finding names where we are convinced that they will have to refinance or they have capital”
- “We are not trying to do a lot of triple C exposure, but even lower in the capital structure, we are finding opportunities, because everyone has gone into the quality trade already. So if everyone’s in the trade, it’s tough to differentiate or find opportunities”
- “We are finding a lot of high yield secured paper trading in high single digits or even double digit yields that can be secured by some assets that we are happy to underwrite even if we go through a downturn”
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