Fixed Income Asset Allocation Insights Aug: 2018

Pine Bridge
By August 27, 2018 13:02

Fixed Income Asset Allocation Insights Aug: 2018

Making A Case For Securitized Assets

Tighter spreads marked most credit-related asset classes in July amid progress on trade, solid second-quarter earnings, and subdued new-issue activity. Investment grade (IG) credit and emerging markets (EM) debt experienced strong total returns despite longer duration profiles amid a backdrop of higher Treasury rates. We have reduced our IG credit exposure to 20% from 25% and increased our securitized products allocation to 20% from 15%. IG credit has been challenged this year by concerns over the impact of trade policy on multinational issuers and supply/demand technicals. While these have improved recently, valuations appear fair given the risks. Since the market should be able to absorb the moderate net new issuance of agency mortgage-backed securities (MBS) despite Fed tapering, we still see the potential for securitized assets to provide positive excess returns over Treasuries.

Pine Bridge
By August 27, 2018 13:02

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