The fixed income markets have rallied tremendously in the last few months as credit concerns have eased. I am still hesitant to jump into high yield credit, especially after the recent rally, but investment grade credit still looks pretty attractive. Spread levels on AA and A corporates still remain at all time highs and we would have to see some serious defaults in the investment grade space to negate the premium being paid on these bonds. The obvious concern is locking in low interest rate levels now by buying corporate bonds, but there are ways to hedge that risk as we will explore later. Look at LQD or CFT as ways to capitalize on corporate credit in a cheap and easy way.
Just be glad your portfolio was not in asset backed home equity….
ABS to the MOON!
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