Should high yield investors be concerned about ‘fallen angels’?

The BBB bond market is growing, but we believe that worries about significant downgrades are overblown

Time to read: 5 min

Earlier this year, our investment grade colleagues discussed the potential implications of the growing BBB segment of the US investment grade market (US investment grade credit: A buy or a bubble?). In high yield, we have also received questions regarding the growth of BBBs. In this blog, we address some important questions: Are we likely to see significant downgrades among these bonds into high yield territory (BB and below)? Would the high yield market be able to absorb these “fallen angels” and what would be the overall impact on high yield? 

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US job growth disappoints for February, but long-term trends are still strong

Invesco Fixed Income doesn’t expect this reading to disrupt the Fed’s policy in the near term

Time to read: 2 min

US nonfarm payrolls increased by a disappointing 20,0001 jobs in February — markets had expected an increase of 180,000.2 Contributing to the disappointment was the performance of key sectors such as construction, leisure and hospitality, education and health services. We at Invesco Fixed Income do not put too much weight on a single payroll print (as emphasized in our January blog: Strong employment data may support Fed flexibility). Our research has shown that the longer-term employment trend has been a better predictor of economic growth.

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US dollar may weaken due to renewed global growth convergence

Invesco Fixed Income shares its views on currencies around the world

Time to read: 2 min

US dollar: Underweight.

We continue to expect the US dollar to weaken against a backdrop of renewed global growth convergence. This will likely be driven by the unwind of the US exceptionalism theme of 2018 and the pivot toward a more dovish Federal Reserve policy going forward. Additionally, US budget and current account deficit concerns will likely persist and could be negative for US dollar performance.

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Interest rate outlook: Fed likely to extend its pause beyond market expectations

Invesco Fixed Income shares its views on rates around the world

Rob WaldnerTime to read: 2 min

US: Underweight.

Global interest rates are close to their recent lows, despite our view that growth risks are fading. In addition, it appears likely that the Federal Reserve will extend its pause longer than the market anticipates, and there is a chance of a pivot to a new policy framework (as discussed in our blog: Five things we think could go right for global markets in 2019). Both factors argue for higher bond yields and steeper yield curves going forward.

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Five things we think could go right for global markets in 2019

From the Fed, to Brexit, to China, we see positive signs that could support risk assets

Rob WaldnerTime to read: 5 min

At Invesco Fixed Income, we often talk about the risks that are likely to upset global markets. In this blog, we highlight the five things we think could go right and support markets in 2019. First, the US Federal Reserve (Fed) has told markets it is willing to be “patient,” and there is the possibility this patience could last a while. Second, US-China trade tensions have calmed somewhat, as the two countries appear motivated to reach agreement on key issues. Third, China is stimulating its economy, which we believe will support growth. Fourth, Brexit is softening, with the tail risk of a hard or no-deal Brexit diminishing in recent weeks. Finally, we see no signs of an impending US recession, despite fears that disrupted markets at the end of 2018. Each of these five possibilities would likely be supportive of risk assets, in our view.

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Three reasons to consider short-term corporate bonds

After several interest rate increases, these bonds may be an attractive alternative for cash

Time to read: 2 min

From June 2017 to June 2018, customers withdrew more than $30 billion from US bank accounts that didn’t earn interest — the first decline in more than a decade.1 Some of that may have been used to fund purchases, but there are also many people who have found more appealing opportunities for their short-term investments, largely thanks to multiple interest rate increases by the Federal Reserve (Fed) since 2015. 

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