AIF - Reading The Signs: Investment Grade Bonds Present Warning And Opportunity
By Gershon Distenfeld
US investment grade corporate bonds look cheaper today than their lower-quality counterparts in the high yield market. Is this the buying opportunity of a lifetime? Not exactly. A closer look reveals there's actually method to the madness.
Both investment grade and high yield corporate bond valuations have declined somewhat in recent years. That's not unusual. The US is in the late stages of a decade-long credit cycle. Interest rates are rising. At some point, rates will rise high enough to cool down the economy, reducing corporate profits.
Here's something that is unusual: