Hương 0912230103
Hương 0912230103
Bond Strategists: Dresdner Kleinwort Says Cut Corporate Bonds
By Cecile Gutscher
Nov. 17 (Bloomberg) -- Investors should cut holdings of corporate bonds as evidence mounts that a slowing U.S. economy will unsettle markets, analysts at Dresdner Kleinwort said.
Dresdner lowered its recommendation for company bonds to ``underweight,'' meaning investors should hold less than their benchmarks recommend. The yield premium, or spread, that investors demand to hold European corporate debt rather than similar-maturity government bonds, is set to rise by ``at least 15 basis points'' before the end of next year, Dresdner said.
``Fundamentals for credit are deteriorating,'' London-based credit analysts Willem Sels and Natalie Wilson wrote in a report yesterday. ``The evidence for a consumer-led slowdown in the U.S. is now accumulating. We have arrived at the stage where volatility should gradually pick up, and we think it is time to go underweight on credit.''
The U.S. economy will probably grow by 1.5 percent for two consecutive quarters, ``which would likely lead spreads to follow the bearish case scenario,'' the Dresdner analysts wrote. Growth in the U.S. was 1.6 percent in the third quarter, down from 2.6 percent in the second and 5.6 percent in the first three months.
A 47-month bull market in corporate bonds has kept borrowing costs low and encouraged European companies to issue a record $1.6 trillion of bonds so far this year, Bloomberg data show.
Corporate bond spreads narrowed to about 110 basis points this year, from an average 162 basis points in the previous five years, according to a Merrill Lynch index of investment-grade and non-investment grade securities. A basis point is 0.01 percentage point
Bond Strategists: Dresdner Kleinwort Says Cut Corporate Bonds
By Cecile Gutscher
Nov. 17 (Bloomberg) -- Investors should cut holdings of corporate bonds as evidence mounts that a slowing U.S. economy will unsettle markets, analysts at Dresdner Kleinwort said.
Dresdner lowered its recommendation for company bonds to ``underweight,'' meaning investors should hold less than their benchmarks recommend. The yield premium, or spread, that investors demand to hold European corporate debt rather than similar-maturity government bonds, is set to rise by ``at least 15 basis points'' before the end of next year, Dresdner said.
``Fundamentals for credit are deteriorating,'' London-based credit analysts Willem Sels and Natalie Wilson wrote in a report yesterday. ``The evidence for a consumer-led slowdown in the U.S. is now accumulating. We have arrived at the stage where volatility should gradually pick up, and we think it is time to go underweight on credit.''
The U.S. economy will probably grow by 1.5 percent for two consecutive quarters, ``which would likely lead spreads to follow the bearish case scenario,'' the Dresdner analysts wrote. Growth in the U.S. was 1.6 percent in the third quarter, down from 2.6 percent in the second and 5.6 percent in the first three months.
A 47-month bull market in corporate bonds has kept borrowing costs low and encouraged European companies to issue a record $1.6 trillion of bonds so far this year, Bloomberg data show.
Corporate bond spreads narrowed to about 110 basis points this year, from an average 162 basis points in the previous five years, according to a Merrill Lynch index of investment-grade and non-investment grade securities. A basis point is 0.01 percentage point
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