Persisting Risks
Still, what looks cheap now can get even cheaper later, especially as the risks that have driven first-quarter losses look set to persist.

“Twelve-month forward excess return expectations from current levels are historically good,” said Greg Venizelos, a credit strategist at Axa Investment Managers, which oversees 887 billion euros. “This doesn’t mean there is no further downside - it’s a good entry point but could get even better in the weeks ahead. It’s prudent to stay a bit cautious.”

To be sure, sharp price drops have allowed some investors to scoop up what they regard as bargains at spread levels not seen since the start of the coronavirus pandemic.

“We view investment-grade in dollars as a strong buying opportunity, probably the best opportunity in the current environment if we think in terms of risk-adjusted expected returns,” said Eric Vanraes, a portfolio manager at Eric Sturdza Investments, which oversees $1.7 billion.

“The widening of spreads has been amplified by poor liquidity,” Vanraes said. “It will improve when people like us seize the opportunity and become buyers of the asset class.” 

This article was provided by Bloomberg News.

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