Corporate Bonds To Buy Now
This page focuses on buying for yourself or a child whose account is linked to yours. If you are planning to give a savings bond as a gift, also see our page on Giving savings bonds as gifts. You can print a certificate announcing your gift. See our selection of announcement cards.
corporate bonds to buy now
In any one calendar year, you may buy up to $10,000 in Series EE electronic savings bonds AND up to $10,000 in Series I electronic savings bonds for yourself as owner of the bonds. That is in addition to the amount you can spend on buying savings bonds for a child or as gifts.
For example: If you want to buy $50 Series I savings bonds and you ask your employer to send $25 from each paycheck to your TreasuryDirect account, we issue a $50 bond for you after every other payday. You don't have to think about it again or do anything else. You keep getting more savings bonds automatically until you change or end your Payroll Savings Plan.
We may issue multiple bonds to fill your order. The bonds may be of different denominations. We use $50, $100, $200, $500, and $1,000 bonds. Again, the amount of your purchase can be any multiple of $50, from $50 to $5,000. You need to tell us only the amount. We determine denominations.
On Form 8888, you also specify who will own the bonds. That means, you can give paper savings bonds to yourself or to anyone else (as a gift). If you have enough money in your refund, you can buy multiple bonds and, if you wish, you can give them multiple registrations.
Despite having similar management and investment strategies, PDO trades at a 5.8% discount to net asset value (NAV, or the value of the bonds it owns), while PHK trades for more than its portfolio is worth. This means that, to fund its 11.5% dividend (based on its premium market price), PHK needs to earn nearly a 12% total return on its portfolio, which is impossible over the long term, but something PHK has been able to do in the past over shorter periods of time (more on this shortly).
No, attractively yielding fixed-income opportunities are not confined to junk bonds. And no, the 60/40 portfolio is not dead. There are countless investment grade bonds issued by strong, well-known companies, yielding over 4%. That is more than three times the dividend yield of the S&P 500 (SPY).
Yields on high-grade corporate bonds appear compelling. However, from a credit-spread perspective, we see too little compensation above risk-free Treasuries given the late-cycle risks in the market.Spreads do have room to widen, but a renewed investor appetite for higher-quality bonds may put a ceiling on how wide spreads could drift.
We expect tighter financial conditions to crimp corporate finances broadly. Rising stars (company upgrades from high yield to investment grade) outpaced fallen angels (downgrades from investment grade) by a wide margin over the past two years. Still, we expect more downgrades in 2023, especially in lower-quality cyclical segments. The depth and duration of any market downturn would determine the impact, but we see that most companies are prepared for a normal recession.Within a more modest allocation to investment grade, we see value in higher-quality issues within financials, utilities, and noncyclical industries. We prefer noncyclical companies because they tend to retain earnings resilience during economic downturns. Though bonds of cyclical companies can have higher spreads at challenging times, they currently trade in line with noncyclicals, another reason we see noncyclicals as the better bet.
Some stabilization in U.S. Treasury rates could be a catalyst for emerging markets (EM) inflows. We saw that occur over the last few months of 2022 during a period of light EM bond issuance, and historical data suggest an improving trend. That should bolster the supply/demand picture for EM, as we see another year of net negative supply.Our more favorable view on the sector late last year benefited from the 125 bps rally in spreads, but it leaves us less constructive today with valuations no longer cheap.Country fundamentals are broadly stable, but we anticipate significant credit differentiation as the global economy slows down in 2023. This will create opportunities for relative value and active management.Our preference for higher-quality bonds is balanced by the fact that spreads in investment-grade EM are very tight and additional borrowing is likely. The high-yield segment of EM offers much more compelling valuations but is also the most vulnerable to further economic disruption.We see 2023 as a market where the best strategy is to be defensive but agile, with enough liquidity to act on new opportunities that arise.
For instance, BBB municipal spreads more than doubled in 2022, from 61 bps to 139 bps. Compare this with BBB corporates, where spreads only rose from 121 bps to 159 bps even with a much more substantial default history.
Note: Chart represents change in yields above U.S. Treasuries of similar duration for U.S. corporate bonds, and the difference in yields between AAA and BBB rated segments of the municipal market.
Christopher Alwine is global head of Credit and Rates, where he oversees portfolio management and trading teams in the United States, Europe, and Asia-Pacific for active corporate bond, structured product, and emerging markets bond portfolios. He joined Vanguard in 1990 and has more than 20 years of investment experience.
We continue to believe it is premature to call an end to the bear market for U.S. stocks. Investors may have moved on from inflation concerns, but they cannot ignore the economic picture. For now, investors should consider reducing U.S. large-cap index exposure. Instead, look to Treasuries, munis and investment-grade corporate credit. Stay patient and collect coupon income.
High yield bonds (bonds rated below investment grade) may have speculative characteristics and present significant risks beyond those of other securities, including greater credit risk, price volatility, and limited liquidity in the secondary market. High yield bonds should comprise only a limited portion of a balanced portfolio.
So where does that leave bonds now? Potentially in a very attractive place. Many of the factors that hurt bonds in 2022 may work toward helping their performance in 2023, experts say. But that doesn't necessarily mean it's time to pile your portfolio into bonds.
"The Federal Reserve raised rates more than they have in 40 years. That caused massive losses inside of bonds," says Robert Gilliland, managing director at Concenture Wealth Management. "It's important to understand that bonds are generally secure, but not necessarily safe."
As a series of interest rate hikes eroded the value of bonds in 2022, it also did 2023 bond investors a couple of favors. For one, bonds are now offering more attractive interest payments to investors. At the beginning of 2022, a six-month Treasury bond paid an interest rate of 0.22%. The same bond today pays 4.76%.
Even if bonds may seem attractive right now, that doesn't mean long-term investors should abandon an all-stock portfolio in favor of adding bonds, says Pszenny. While the bond market suffered in 2022, so did the tech stock-heavy Nasdaq 100, an index with greater potential for high long-term returns.
In other words, if your original plans didn't include bonds, don't include them now. "Once you pick your asset allocation, unless something changes with your goals or time horizon, stick with your current allocation," Pszenny says.
If your plan already includes a bond allocation, consider moving to longer-dated bonds, Pszenny says. That's because bonds with longer maturities tend to be more sensitive to moves in interest rates. Should the Fed begin decreasing interest rates, long-term bonds will be the biggest beneficiaries, he says.
Some of your investing goals may be coming up sooner than a long-term goal like retirement, such as hosting a wedding or buying a house. Depending on how far out your goal is, you may want to hold a mix of stocks, bonds and cash.
1. Yields are still near their 12-year highs. Corporate bond yields have risen along with U.S. Treasury yields, and then some. Corporate bond yields are composed of U.S. Treasury yields plus a spread meant to compensate investors for the additional risks that corporate bonds offer, like the risk of default.
2. The corporate bond yield curve is positively sloped. The same can't be said for U.S. Treasuries. When the yield curve is positively sloped, yields for longer-term bonds are higher than the yields for short-term bonds. After all, investors should be compensated with higher yields for taking on additional interest rate risk, but that's not the case today with most Treasury yields.
Put differently, corporate bond investors are rewarded with higher yields when investing in intermediate- and long-term bonds. With U.S. Treasuries, yields decline from two years through 10 years, as the chart below illustrates.
We've been suggesting investors modestly extend the average duration of their bond holdings for a few months now. For Treasuries, that guidance might be difficult to swallow since that means locking in lower yields than what's available in one- and two-year Treasuries, for example. But that's not the case with investment-grade corporates, as the chart below illustrates. Keep in mind that corporate bonds do come with more risks, of course.
3. Investors can earn 4% or more without taking too much credit risk. We continue to suggest an "up in quality" theme this year. With recession risk on the rise, we don't suggest reaching for yield by dropping in credit quality. We generally have a positive outlook for the broad investment-grade corporate bond market, but for investors who don't want to take too much credit risk, "A" rated corporate bonds still generally appear attractive.
As the chart below illustrates, "A" rated corporate bond yields are also up sharply this year, and investors can earn yields of 4% or more, on average, with maturities of seven years and beyond. For investors that don't want to lock up their funds for that long, average yields are still in the 3.75% range for three- to five-year maturities. 041b061a72