Schroders' Sparks: Brace portfolios for high yield correction

Schroders' head of US fixed income Wesley Sparks has argued investors should brace for a high yield correction in the first quarter of next year, as yields could rise by as much as 100 basis points.

Sparks (pictured) said the sector's stellar performance is under threat as yields have been pushed to all-time lows, and he has moved underweight CCC bonds for the first time since 2008, in anticipation of a correction. With government bonds offering little nominal value, investors have been hunting for yield further down the corporate capital structure. High yield bond investors have been rewarded this year, with global high yield bonds one of the best fixed income asset classes in the first nine months of 2012, having returned 15% over the period, according to Bloomberg. The Barclay...