Making the grade: How risky are BBB bonds?

BlackRock
By October 7, 2019 07:46

Making the grade: How risky are BBB bonds?

Economic uncertainty has increased investor focus on the possibility of BBB-rated bonds being downgraded to junk. Investors should weigh this risk with their search for yield.

Over the past several months, I have been fielding more questions about the state of the BBB-rated bond market. (BBB is the lowest tier of investment grade.)  As this credit cycle has lengthened, investors are concerned about the potential for a large amount of bonds being downgraded to junk, a status known as “fallen angels.” In this post, I’ll assess the risks of this growing market and how they can position for a potential downturn.

Growth of the BBB bond market

Over the past decade, the investment-grade corporate bond market has grown as issuers have taken advantage of rock-bottom interest rates and increased demand from yield-starved investors. Today, the BBB-rated segment now makes up over 50% of the investment grade market versus only 17%

BlackRock
By October 7, 2019 07:46

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