Q4'23 Bond Market Opportunities

October 24, 2023

At Landing Point, as part of our well-defined macroeconomic investment process, we aim to identify and capitalize on opportunities throughout all phases of market cycles. Currently, we are optimistic about bond markets. The driver of this opportunity includes a peak in short-term interest rates expected within the next 3-6 months, coinciding with the Federal Reserve pausing fed funds rate hikes.  You can see Fed Funds rate expectations in the chart below. 

As short-term interest rates reach their peak, we anticipate growing demand for higher yields extending out along the yield curve. This jump in demand will push bond prices higher while simultaneously driving yields lower. In response, we are strategically positioning our portfolios to proactively take advantage. Our primary objectives include securing attractive yields and minimizing short-term reinvestment risk by purchasing intermediate and long-term corporate bonds trading at discounts in anticipation of an impending rally. Security selection is very important during this transition, as default risk in corporate bonds reemerges due to the increased borrowing costs for corporations, potentially impacting their balance sheets.

Current Yield Curve

Short term rates remain elevated relative to intermediate and long-term.

Source: Bloomberg LP

Source: JP Morgan Asset Management

The information is provided solely as general investment education. None of the information should be regarded as a suggestion to engage in or refrain from any investment-related course of action. The information herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of B. Riley Wealth Advisors Inc. Opinions are subject to change with market conditions. Past performance does not guarantee future results.