There were many articles at the start of the year arguing that corporate bond yields were attractive and that it was time to buy. That was premised on the Fed announcing a pause in interest rate hikes. Yesterday 25/8, Powell warned that inflation was too high and that the Fed was prepared to raise rates further. So maybe the 'experts' were as usual, wrong, or more charitably, they made the call too early.
I am going to be more charitable and say that the experts made the call too early, but it is inevitable that the Fed is going to pause at some point.
Basically, I have to decide where to put my free cash flow. Some of it is going into equities, but I need a place to park my bond portion. As mentioned elsewhere, I have hit the $200k cap for SSB and have constructed at $10k/month T-bill bond ladder. So I am looking at diversifying to other forms of fixed income. It also seems that there are no more Astrea PE bond issues forthcoming as Astrea is a great placed to park cash.
iShares LQDE, which is LSE-listed version one of the big USD Corporate bond ETFs (LQD is the US version), has a Weighted Average YTM of 5.68%. iShares SLXX which is UK Corporate bonds, has a Weighted Average YTM of 6.22%.
At these levels, I think it is ok to start adding to my bond ETF holdings again and I have added to LQDE. In terms of forex risk, I feel that S$ seems on the expensive side so I don't see US$/GBP depreciating further against the S$.
I thought AGGU with a yield to maturity of 4% looks not too bad with a tenor of 8 years.
ReplyDeletethanks for the tip Kyith. Previously I had ignored it because it was holding bonds of 'low interest rate countries' like Japan (11% holding, etc), but I think its now worth a look.
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