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Corporate Bonds Pay Highest Returns in 12 Years

By    |   Friday, 15 Jan 2010 09:24 AM

Corporate bonds are providing investors with the highest returns in 12 years, and experts say the party’s not over yet.

The Bank of America Merrill Lynch Global Broad Market Corporate Index has returned 1.02 percent so far this year, the largest gain for that period since 1998.

That follows on the heels of a 16.3 percent gain last year.

“Asset managers need to invest a lot of money from pension funds, insurance companies and banks, so bond spreads are tightening,” Santiago Rubio, head of investment funds at La Caixa’s asset management unit, told Bloomberg.

Translation: money managers are buying corporate bonds.

“Bond spreads are tightening” means that yields of corporate bonds are dropping closer to yields of Treasury bonds.

And that means corporate bonds are rallying.

The rally is pushing corporations to offer more bonds, which in turn can push the gains further, as investors buy those bonds.

“We’re telling our clients get into the markets now (to issue bonds), don’t leave it all for later in the year because it could be more difficult to finance by the middle of the year or later in the year,” Mark Bamford, head of bond syndication for Barclays Capital, told Bloomberg.

While experts are bullish on corporate bonds, many are bearish on Treasury bonds.

"The trend in (Treasury) rates is higher. It's going to be a question of the upward push," Kim Rupert, managing director of bond analysis at Action Economics, told CNBC.

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Corporate bonds are providing investors with the highest returns in 12 years, and experts say the party s not over yet. The Bank of America Merrill Lynch Global Broad Market Corporate Index has returned 1.02 percent so far this year, the largest gain for that period since...
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2010-24-15
Friday, 15 Jan 2010 09:24 AM
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