• Higher coupons again
• Good prospects for institutional investors
The stock markets are experiencing a difficult year in 2022. Investors in corporate stocks are worried about inflation and fears of a far-reaching and protracted recession. Against this background, more and more experts have recently recommended investing in bonds again, especially if investors are long-term oriented.
Difficult situation on the bond market
While stocks and bonds do contrarian and negative correlation in less turbulent market times, this has not been the case this year. There was a kind of unison between the stock and bond markets, with both corporate stocks and bonds giving investors little joy in 2022 so far.
But recently, a recovery effect has set in on the bond market – thanks to the interest rate turnaround, the yields on two- and ten-year government bonds have risen to their highest level for more than a decade and have clearly left the negative range. “There are again sufficient coupons on the bond markets for large investors such as insurers and pension funds,” quoted the “Frankfurter Allgemeine” Konrad Kleinfeld, head of bond business for SPDR ETF at State Street Global Advisors in Europe. “They didn’t get that for many years,” the expert continued.
Bond market becomes more attractive again
Although the bond markets continue to fluctuate strongly, high inflation and the simultaneous rise in interest rates have made the bond market significantly more attractive for bond investors. Lower prices are currently offset by significantly higher coupons. Investors who rely on the protective function of bonds in a stock market environment that remains uncertain are therefore benefiting from the latest developments on the bond market.
This is also good news, especially for institutional investors. Pension funds and insurance companies that have had to do without coupons for years can find their way back into a bond class that has traditionally been in high demand from this side. According to the newspaper, Kleinfeld does not assume that the issuer risk will increase in view of the weak economic prospects, on the contrary: “Bonds often benefit in a late economic cycle and also in a recession,” he is quoted as saying by the newspaper. “So far we have only seen very few bond defaults, the ratings are currently being upgraded rather than downgraded. Investors are focusing on safe bonds with a low probability of default.”
Editorial office finanzen.net
Image sources: travellight / Shutterstock.com, Andrey_Popov / Shutterstock.com