Investment Grade Credit, High Yield Debt, Emerging Markets Debt Appear
Attractive, Standish Says
BNY Mellon Investment Boutique Sees Potential Pitfalls in Carry
NEW YORK, Aug. 28, 2013
NEW YORK, Aug. 28, 2013 /PRNewswire/ --Investment grade credit, high yield
debt and emerging markets debt appear attractive to fixed income investors,
according to a recent report from Standish, the Boston-based fixed income
specialist for BNY Mellon.
The report, Bond Investors Keep Calm and Carry Carefully, notes the importance
of focusing on areas of the market where valuations are attractive while
avoiding idiosyncratic risks.
The nearly 100-basis-point increase in 10-year Treasury yields between May and
June pushed the yields into the low-end of Standish's fair valuation range,
increasing the attractiveness of several fixed income categories, the report
Long corporate bond spreads widened during the rise in yields to 197 basis
points (bps) over Treasuries. "Long corporate valuations appear attractive,
particularly for pension plans that are now in better financial shape and
looking to implement liability driven investing (LDI) strategies," said David
Leduc, chief investment officer of the active fixed income division of
Standish and author of the report. "It may be an opportune time to increase
allocations to long corporate bonds while the supply and demand picture is
still relatively balanced."
The recent sell off in emerging markets has made this sector increasingly
attractive, Standish said. "Tighter fiscal policies, lower debt levels and
relatively low inflation pressures mean that emerging markets generally enjoy
greater policy flexibility than developed markets," Leduc said.
If the U.S. outlook continues to improve, as Standish expects, emerging market
countries could benefit from the ensuing increase in trade and international
investment, the report said. However, Standish said it is being selective as
some countries and companies could face challenges in a higher interest rate
environment, particularly if portfolio flows to emerging markets halt or
Regarding carry, Standish sees it as attractive in some market sectors and
unattractive in others where the potential risks outweigh the potential
Carry is one of the two components that determine the total return of a bond,
with appreciation being the other component. Assuming that the price stays
constant, the carry of a bond is its current yield The value of carry can
change due to market fluctuations, possibly lowering or increasing the return
to investors, Standish said.
Notes to Editors:
Standish Mellon Asset Management Company LLC, with approximately $165 billion
of assets under management, provides investment management services across a
broad spectrum of fixed income asset classes. These include corporate credit,
emerging markets debt (dollar-denominated and local currency), core / core
plus, tax–sensitive, short duration, stable value and opportunistic (U.S. and
global) strategies. Standish also offers full service capabilities in
insurance client strategies and liability driven investing. The firm includes
assets managed by Standish personnel acting as dual officers of The Dreyfus
Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel
acting as dual officers of Standish.
BNY Mellon Investment Management is one of the world's leading investment
management organizations and one of the top U.S. wealth managers, with $1.4
trillion in assets under management. It encompasses BNY Mellon's affiliated
investment management firms, wealth management services and global
distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients
manage and service their financial assets throughout the investment lifecycle.
Whether providing financial services for institutions, corporations or
individual investors, BNY Mellon delivers informed investment management and
investment services in 35 countries and more than 100 markets. As of June 30,
2013, BNY Mellon had $26.2 trillion in assets under custody and/or
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manage, service, distribute or restructure investments. BNY Mellon is the
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All information source BNY Mellon as of June 30, 2013. This press release is
qualified for issuance in the UK and US and is for information purposes only.
It does not constitute an offer or solicitation of securities or investment
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Registered office of BNY Mellon Asset Management International Limited: BNY
Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in
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SOURCE BNY Mellon
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