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While stocks are getting most of the attention at the start of 2024, there are some opportunities for fixed income investors as well.
Andrzej Skiba, head of U.S. fixed income at RBC GAM, joins Yahoo Finance Live to discuss opportunities for investors, especially fixed income investors, in the current fixed income market.
Skiba acknowledged that many bond investors were “surprised by the pace of rally in the last eight weeks of the year.” [2023]”We may be trying to adapt to the current market,” he said, adding, “We’ve come a long way, so some consolidation is natural.”
As for what to buy, Skiba noted that financial instruments are more attractive than they have been in the past, saying, “We’re looking at spread differentials, yield differentials that are close to historical ranges.” . Skiva compares financials and non-financials, and financials haven’t been “this cheap” since 2023. Skiba expects many bond investors to maintain supply and stay tuned. This is an opportunity for them to gain additional exposure. Part of the bond “world”.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Ike Ntekim
video transcript
Jared Breichle: With about 30 minutes left until the closing bell on Wall Street, markets are mixed. As for bonds, 10-year bonds are expected to hover around 4%. There were some big moves in early trading following weaker-than-expected headline inflation figures released this morning.
Andrzej Skiba is a new addition. He is head of U.S. fixed income at RBC Global Asset Management. And thank you for joining us today.
I’ve seen it. Let’s start with 10 years. It peaked at about 5% late last year. Bond prices have risen incredibly and yields have fallen below 4%. We’ve seen all the stock prices rise on the back of this. Where are we currently in terms of that trend?
Andrzej Skiba: Well, thank you for joining me. Yes, there are plenty of investors who were surprised by the pace of the stock’s rise in his last eight weeks of the year and are trying to figure out what steps to take next. In our opinion, we have come a long way. So some degree of consolidation is warranted, and that’s exactly what we’ve been experiencing in recent sessions, not just for U.S. Treasuries, but for the broader credit markets.
Jared Breichle: Well, we had a big bank profit today. I bring this up because the big money center banks will be offering and selling about $25 billion worth of bonds this month alone. Many other supplies are arriving online. What are the opportunities for investors here, both investment grade and high yield?
Andrzej Skiba: Well, if you look at the high-grade world, it’s clear that the financial sector is important. As a result, bank debt has lagged significantly behind the non-financial sector in recent quarters. So these close to historical wides he’s looking at the spread difference between the two segments, and therefore the yield difference. So, other than the turmoil we experienced in the spring of 2023 with the local bank crisis, financial products were not significantly cheaper than non-financial products in the bond market. And we are confident that many bond investors are waiting for the issuance of large amounts of supply in the coming sessions. For investors who missed the party a little bit at the end of last year, as banks report their results, this could be an opportunity to increase exposure to what looks like one of the most attractive parts of the fixed income universe.
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