UBS On-Air: Market Moves
Top of the Morning: Year Ahead - Investment Grade Corporates edition
Dec 14, 2023
In this podcast, Barry McAlinden, Senior Fixed Income Strategist Americas at UBS Chief Investment Office, discusses the outlook for Investment Grade Corporate Bonds in 2024. He explores topics such as performance in the past year, potential appreciation in bond prices, and opportunities within the industry sectors and credit ratings. McAlinden recommends a barbell approach to yield curve strategy for investors.
13:31
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Quick takeaways
- Investment grade corporate bonds have performed well in 2023, providing a total return of around 5.3% driven by coupon income and relatively stable pricing.
- The outlook for investment grade corporate bonds in 2024 is positive, with the potential for price gains driven by declining treasury yields and limited spread widening.
Deep dives
Overview of Investment Grade Corporate Bond Market
Investment grade corporate bonds are primarily issued by companies, with credit ratings ranging from triple B to triple A. The market is largely dominated by US dollar-denominated debt securities, with issuers from North America, Europe, and APAC. The size of the investment grade corporate bond market is around 8 trillion. The investor base primarily consists of institutional investors such as pension funds and insurance companies, although individuals also invest in this asset class. It's important to note that investment grade corporates are fully taxable investments, so individuals are advised to hold them in tax-advantaged accounts.
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