The WSJ reports,"bonds rated in the triple-B-category, the low end of investment grade, are poised to do better than some higher-rated bonds in the coming months, analysts from Barclays said in a research note Friday.
In the note, they suggested that investors consider selling bonds from the higher-rated companies and pick up debt issued by companies just north of the junk-rating threshold. They said some triple-B companies offer yields that are high for the rating, like Boardwalk Pipeline Partners LP, which yields 4.600% for a 2023 bond, and Transocean Inc., which yields 5.967% on a 2038 bond. In contrast, a 2023 bond from BP PLC, rated single-A, yields 3.395%.
“We expect BBB credits to benefit from investors seeking additional yield,” the Barclays analysts wrote.
Bond markets overall have rallied this year as U.S. economic growth remains uneven and the stock market turns in a lukewarm performance. Benchmark U.S. Treasury yields remain relatively low, so investors looking for higher yields are buying corporate bonds.
The Barclays analysts argued that triple-B bonds are offering more yield compared to Treasurys than they did before the financial crisis. Right now, triple-B bonds are yielding 1.30 percentage points more than Treasurys. Before the crisis, that figure was 1.27 percentage points. Higher yields indicate lower prices".
