Gartside: The best vs the rest in global fixed income

THE BEST VS THE REST IN FIXED INCOME

Nick Gartside, international chief investment officer for global fixed income at J.P. Morgan Asset Management, separates the best asset classes from the worst within the global bond market.

THE BEST 1. High yield – We expect high yield bonds to continue to deliver attractive returns this year. They offer an attractive coupon, averaging about 7% per annum, which gives good inflation protection. Also, default rates are continuing to fall as companies strengthen their balance sheets and benefit from rising profitability. As default rates fall, the spread over US treasuries (a measure of high yield risk) should continue to tighten. We expect spreads to tighten by around a further 0.5%-1% this year, which on a five-year duration bond will equate to about a 2%-5% capital ga...