Vanguard, Wells Capital Call for a Corporate Bond Reality Check
- Taking some money off table after 9.4% gains this year
- ‘Credit is challenged and ultimately has to reprice’
What to Expect for the Bond Markets
Some of the world’s biggest investors, including Vanguard Group Inc. and Wells Fargo & Co.’s asset management arm, are dialing down the risk they take in U.S. corporate bonds, even as central banks globally keep the money spigots on.
With just three months left in 2016, they want to lock in profits for the year and fear the relatively high valuations for investment-grade and junk debt from companies. The securities are trading close to their lowest yields relative to government debt in a year, Bloomberg Barclays index data show. Meanwhile S&P 500 companies’ earnings are falling and companies’ debt levels are high, which also make the bonds look less attractive. Money managers worry the current credit rally, buoyed by cheap money, won’t last long term without higher economic growth.