State Street SPDR ETFs: Convertible bonds and high yield continue to shine

State Street SPDR ETFs: Convertible bonds and high yield continue to shine

23 januari 2025

Obligaties High Yield
Obligaties (03)

State Street SPDR ETFs publishes its Q1 2025 Bond Compass, outlining how fixed income investors can approach challenges and opportunities this year.

 

Market outlook: convertible bonds and high yield continue to shine in early 2025

If the economic backdrop seen in Q4 persists into Q1 2025, then it is logical for investors to continue to focus on the risk-on bond exposures that performed well in 2024. Convertible bonds and high yield emerged as top performers in 2024, delivering returns of 8.0% and 10.0% for US high yield, respectively. This outpaced other asset classes like Treasuries, which yielded just 0.6%. Both asset types maintain strong correlations with small- and mid-cap equities, suggesting further upside if market performance broadens beyond mega-cap stocks. High yield bonds, in particular, benefited from their high coupon and short duration, providing resilience against rate volatility and outperforming longer-duration strategies.

Avoiding duration pitfalls

Despite the start of central bank policy easing, extending duration did not pay off in 2024. There remain grounds for caution in US rates, Euro rates already look priced for the ECB to deliver a full cycle, but longer duration has potential in the UK.

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