U.S. Treasuries: Foreign Buying—Who’s No. 1?
The U.S. interest rate backdrop continues to remain challenging for investors looking for income. The rise in U.S. Treasury yields following last November’s Election Day, and a bit more recently around the Federal Reserve’s first rate hike in 2017, allowed investors to possibly believe that rates may finally be making a more permanent move higher. Or, at the very least, that yield levels had finally bottomed and a new and elevated trading range had been established.
With the calendar turning to September on Friday, we’re all sitting back and lamenting the end of another summer. Well, for fixed income investors, any possible summer doldrums could quickly change, as a number of potentially headline-making events are looming directly ahead, specifically on the central bank front.
One question I get on a regular basis is this: Do U.S. corporate bonds have further room to produce positive returns or are they oversold and due for a correction, if not an outright sell-off? Certainly, the performances in both the investment-grade (IG) and high-yield (HY) arenas thus far in 2017 have been among the stronger ones in the realm of global fixed income, and in my opinion, given where spread levels currently reside, it’s a fair question.