Corporate-bond buyers are accepting the lowest relative yields since before the 2008 financial crisis to own dollar-denominated notes that face declining returns as the Federal Reserve considers paring record stimulus.
JPMorgan Chase & Co. recommends sticking with U.S. high-yield bonds next year as the best protection against rising interest rates. Morgan Stanley cautions that valuations are unattractive following a record five-year rally.
The first annual losses in U.S. government-backed mortgage bonds since 1994 are deepening as the dual threats of a new regulator and a Federal Reserve pullback leave buyers navigating around what JPMorgan Chase & Co. calls a modern-day Scylla and Charybdis.
Spanish notes led declines among euro-area government securities this week as reports showing inflation quickened damped the case for European Central Bank stimulus that tends to boost shorter-maturity debt.
The Treasury Department’s $29 billion sale of seven-year notes may draw a yield of 2.088 percent, according to the average forecast in a Bloomberg News survey of six of the Federal Reserve’s 21 primary dealers.
Bond buyers are demanding the most in at least a decade to own long-dated bonds relative to debt with short maturities as they seek to protect themselves from losses when the Federal Reserve starts scaling back stimulus.