When to Buy the Dip in Bonds
View original at finance.yahoo.comWhen to Buy the Dip in Bonds Investing.com — Investors looking to “buy the dip” in bonds may need to wait for further market stress, with UBS warning that current credit spreads are not yet fully pricing in a potential growth shock stemming from geopolitical tensions and oil market disruptions…
What we drew from this source
The claims Via News extracted from this document. We point to the source; we don't replace it.
Long positions in benchmark sovereign bonds, such as Germany's 10-year Bund, are attractive hedges in both downturn and recovery scenarios
60% confidenceBuying opportunities for U.S. high-yield bonds emerge at spreads of around 415 basis points
60% confidenceEuropean investment-grade bonds become attractive near 130 basis points spread
60% confidenceBuying opportunities for U.S. investment-grade bonds emerge at spreads of around 115 basis points
60% confidenceMarkets are pricing in just a 10%–25% probability of a negative growth shock
60% confidenceEuropean high-yield credit becomes compelling at 420 basis points spread
60% confidenceSpread levels of 0.5 to 0.75 standard deviations above five-year averages historically mark a point where credit markets begin to stabilize and tighten over subsequent months
60% confidenceUBS prefers a neutral stance on credit, advising investors to wait for more attractive entry levels before stepping in
60% confidenceIn the event of a growth slowdown, government bonds could outperform credit
60% confidenceCredit markets remain relatively complacent, with spreads only modestly wider despite escalating risks tied to the Middle East conflict
60% confidenceRisks remain skewed to the downside, particularly if energy supply disruptions worsen
60% confidenceThe best buying opportunities are likely to emerge only after markets more fully price in downside risks
60% confidenceCurrent credit spreads are not yet fully pricing in a potential growth shock stemming from geopolitical tensions and oil market disruptions
60% confidenceUBS does not view a severe growth shock as its base case
60% confidence