The three main categories of the bond issues are:
Within these three areas, there are many other subgroups including high yield bonds and emerging market bonds that we will discuss in this analysis.
In a macroeconomic background with intrest rates in the amount of zero, the investors focus on types of bonds different by government bonds that do not have attractive yields anymore.
The two mentioned categories, however, have a bigger volatility (price fluctuations) than a government bond, with higher risk for the capital to turn into a negative or positive direction.
Their trend and their flow coupons (interest) are influenced by two factors:
As we prouved with the analysis of the S&P500, media do not actually help us to get the right chances from these asset classes.
Currently the discount rate is zero, or close to zero, in almost all countries of the world. Here it will probably stay for several years. The investment choice will then focus on the spread. But when can the spread be an opportunity?
That’s the trend of the spread on emerging markets in the past…
…and the hig yeald spread.
Buying these bonds when the spread is higher than its historical average you can have two advantages: