US investment‑grade credit
Higher‑quality corporate bonds in the US remain relatively stable. Companies are still generating solid revenues and profits, and most can comfortably meet their interest obligations, supporting resilience in the investment‑grade market.
Leverage has increased among some issuers, however, and the gap between stronger and weaker balance sheets has widened. Bond markets are no longer rewarding all issuers equally.
What this means for portfolios:
Investment‑grade credit remains an important source of income. We focus on financially strong companies with prudent capital management and predictable cash flows.
US high yield credit
High yield bonds offer higher income but carry increasing risk. Many lower‑quality companies are more highly leveraged, earnings momentum has slowed and default rates are expected to rise gradually. Despite this, yields have not widened enough to fully compensate investors.
While this is not a crisis environment, future returns depend more on stable economic conditions than on attractive valuations.
What this means for portfolios:
Where we invest in high yield, we favour shorter‑dated bonds, which allow income generation while reducing sensitivity to economic slowdowns and refinancing risk.
Government bonds: Focus on the US
Government bonds outside the US offer relatively low yields at a time when inflation remains elevated and growth subdued. This limits their ability to protect purchasing power or provide meaningful diversification.
What this means for portfolios:
We prefer US government bonds for defensive positioning and remain cautious on international government bonds.
Emerging market debt: Less attractive than before
Emerging market bonds have had a difficult period. Currency weakness has reduced returns, while higher energy prices and a stronger US dollar have increased pressure on these economies. Yields have not risen enough to offset these risks.
What this means for portfolios:
We remain cautious and selective, waiting for more stable currencies and more attractive valuations.
The below FSCA regulated companies, who conduct asset management and investment services, are owned by Orion Investment Managers (OIM). These subsidiary companies operate in a number of different jurisdictions, and each provides investment management and products to their clients. Orion Investment Managers, is, in turn, owned by Spirit Invest International, which owns a portfolio of companies in the investment sector...
Read More.
