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JPMorgan finds ‘sharp' downturn in credit investors' outlook
[LONDON] Sentiment toward corporate bonds has nosedived - just as the September supply onslaught looms.
According to JPMorgan Chase & Co's August survey of fund managers, those with bullish outlooks have shrunk to just 20 per cent from 63 per cent, and are outnumbered by bears representing 26 per cent of respondents - more than double the proportion in July.
Just over half have turned neutral on the direction of spreads, compared with around a quarter the previous month. The more cautious tone may spell trouble after the recent fizzling of a five-week rally in the credit markets.
With September among the busiest periods of the year for debt sales, the majority of those in JPMorgan's survey at 63 per cent remain neutral with respect to their positioning, as they seek to shorten the duration of their portfolios.
Risk premiums, or the extra yield investors demand to hold US high-grade bonds rather than government benchmarks, have see-sawed this year as investors fret interest-rate risk against the backdrop of solid economic growth.