Is it time to start de-risking bond portfolios?

The bottom has fallen out of gilt yields and high-yield credit spreads have been bouncing all over the place. The iTraxx high yield spread index hit a two-year high of 249 basis points (bps) to 310bps during the month, before rallying in early June to 245bps after the month-end.

These are the kinds of fluctuations that you see towards the back-end of a business cycle. The macro-implied probability of recession has spiked recently. The yield curve has inverted in the US and the UK; never a good sign about an economy. Exactly how long between an inversion and an economic downturn is extremely difficult to predict. Sometimes it is nine months, other times it is two years or more. We are not calling the end of the market - that is a dangerous thing to be doing. Before you know it you are a perma-bear wheeled out onto CNN every week to talk about how your portfolio o...