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Where we see income opportunities as key rates look poised to rise

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This is a sponsored article from J.P. Morgan Asset Management

US high-yield (HY) corporate bonds6 remain one of the leading sources of return, as of 31 August 20217. Fundamentals within the HY market are relatively attractive1, supported by robust growth, strong corporate earnings and declining default rate8.

We continue to be positioned in shorter duration and higher quality HY corporates. We also show preference for short duration bonds compared with long-end debt.

Another leading driver of returns is securitised assets, as of 31 August 20217. In particular, commercial mortgage-backed securities (CMBS) have been one of the leading drivers of returns supported by vaccination progress in the US, expanded mobility and travel among the general population, the continued decline in loan delinquencies and improvements in commercial real estate fundamentals.

The dynamics surrounding multi-family CMBS and the long-term demographic trends continue to support fundamentals for those properties.


We believe that yields are unlikely to move materially higher until the central banks are well into the tapering process. As such, being diversified3 and tapping into relatively attractive income and risk-adjusted return potential by investing flexibly across multiple debt markets will continue to be crucial.

Provided to illustrate macro and asset class trends, not to be construed as research or investment advice. Investments are not similar or comparable to deposits. Investors should make independent evaluation and seek financial advice. Risk management does not imply elimination of risks. Forecasts/ Estimates may or may not come to pass.

1. Yield is not guaranteed. Positive yield does not imply positive return.
2. ”Transcript of Chair Powell’s Press Conference”, Board of Governors of the Federal Reserve System, 22.09.2021.
3. Diversification does not guarantee investment return and does not eliminate the risk of loss.
4. Source: J.P. Morgan Asset Management, Bank for International Settlements. Data reflect most recently available as of 30.09.2021.
5. Source: Barclays Live, J.P. Morgan Asset Management. MBS refers to mortgage-backed securities, Global IG Corp bonds refers to global investment-grade corporate bonds and US Corp HY refers to US corporate high-yield bonds. Volatility is realised annualised volatility based on monthly data since the inception of JPMorgan Income Strategy. Indexes used are: Bloomberg Barclays Treasury Index, Bloomberg Barclays US MBS Index, Bloomberg Barclays Corporate Credit Index and Bloomberg Barclays US HY Index. US Corporate High Yield is based on Yield to Worst. US Treasuries, Mortgage-Backed Securities (MBS) and Global Investment Grade (IG) Corporate is based on Yield to Maturity. JPMorgan Income Strategy is based on Yield to Maturity of the underlying portfolio. Past performance is not necessarily a reliable indicator for current and future performance. Data as of 31.08.2021.
6. Investments in below investment grade or unrated debt securities, may be subject to higher liquidity risks and credit risks comparing with investment grade bonds, with an increased risk of loss of investment.
7. Source: J.P. Morgan Asset Management. Data as of 31.08.2021.
8. Source: J.P. Morgan Global Economic Research, J.P. Morgan Asset Management. The 30-year average default in the US stood at 3.49%, and at 2% as of end-September 2021. Default rates are defined as the par value percentage of the total market trading at or below 50% of par value and include any Chapter 11 filing, prepackaged filing or missed interest payments. The default rate is an LTM figure (last 12 months) and tracks the % of defaults over the period. Default recovery rates are as of September 2021 due to data availability.

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For Professional Investors and Financial Intermediaries only.

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore and the Securities and Futures Commission in Hong Kong. Investments are not comparable or similar to deposits. Investment involves risk, value of investments may rise or fall including loss of any or all of the amount invested. Not all investment ideas are suitable for all investors. Past performance is not indicative of current or future performance. Diversification does not guarantee positive returns or eliminate risk of loss. Investors should make their own evaluation or seek independent advice before investing. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not be taken as or constructed as research or investment advice. Issued in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K) and in Hong Kong by JPMorgan Funds (Asia) Limited. All rights reserved.

This is a sponsored article from J.P. Morgan Asset Management

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