U.S. corporate bond investors were focusing on companies deemed best able to withstand an economic downturn, according to a November survey by Bank of America which found 59 per cent of those surveyed listing a potential mild recession as their top concern, up from 56 per cent in its prior survey, reports Reuters.
Some 31 per cent of survey participants saw a soft landing: slower but positive growth and lower inflation which translated to a relatively benign outlook for the U.S. economy in 2024.
The next greatest concern was geopolitical risk in the Middle East followed by the risk of more defaults in commercial real estate debt.
Corporate bond investors are more selective with their funds, as their cash levels declined in November from September, according to the BofA survey.
Investors decreased their positioning in longer-dated debt between September and October, according to the BofA survey. Investment-grade investors shifted to debt maturing between five and 10 years, while high-yield investors positioned more into debt maturing in one to three years.
More the half of investment-grade investors expect bonds rated BBB to deliver the highest risk-adjusted returns over the next 12 months, followed by A or higher and BB.
Some 41 per cent of junk bond investors (compared to 24 per cent in September) expect those rated BB to outperform, followed by B and BBB.
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