Research (Penizenavic.cz)
Bonds  |  March 23, 2012 08:51:21

Coming Renaissance corporate bonds?


Investments in corporate bonds this year are the most promising at all. The actual corporate bond markets on both sides of the Atlantic are experiencing an unusually busy period, when it would have the means to finance their operations like got more and more companies. As the market for corporate bonds actually takes place, the time was right to invest in these securities?

What is the extraordinary turmoil in the markets for corporate bonds? Factors is more, both from the perspective of investors and issuers in terms of themselves.


Investors



Investors attention to markets with corporate bonds turns especially in the context of declining revenues "safe" government bonds and decreasing the quality of the less safe. From this perspective, it then especially higher yields as attractive to invest in corporate bonds. Another important factor is the declining level of risk associated with these investments. Pumping liquidity into the system, which now performs both the ECB and the Fed have a positive impact on such securities, if the Fed are the words of Ben Bernanke that the Fed will be in addition to buying U.S. Treasury bonds and "other" securities.

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Issuers


Itself comes to corporate bond markets in search of easier and cheaper credit, if it is for many of them become unavailable or expensive bank loans. Especially now European banks now prefer to "sit" and wait for money, especially with regard to the unpredictable situation with regard to the economic development of peripheral Eurozone. Another brake on the motor of European credit banks are then increased demands on their capital adequacy (Basel III).


In the market for corporate bonds is unusually busy


The above resulted in the fact that at the end of February this year, the volume in the European markets corporate bonds underwritten by more than 80%, and while a number of major European companies upisovala their bonds on the U.S. markets. Upisovaly its bonds are still major companies such as Nestle, RWE and Hochtief. On the other side of the Atlantic to the increased bond underwriting resolved such as PepsiCo.

It will "ride" to continue?


In the short term may seem to be corporate bond market overheated, both due to high demand slowly disappearing high yields of these bonds. Average annual income in the euro this year underwritten corporate bonds was 4.53%, some companies have managed to underwrite their bonds with an annual income below 2%.The trend of diminishing returns, which now exists in these markets, however, attracts more and more issuers who feel an opportunity to borrow money cheaply. Revenues may decline only in the event that the markets are still plenty of investors willing to invest in these bonds. They begin to purchase these investors eager to pick up the loss, there will not issuers nothing but offer higher yields. In the medium and long term corporate bonds are more suitable supplement ingredients bond portfolio management is that when corporations generally more "readable" than farming dress, and the ratings of a number of them exceed the ratings of government bonds.

Two new "pike" in the pond with the corporate bond mutual funds


Opportunities that now corporate bond markets are aware of offers and investment companies, two of them (J & T Banka, INVEST CP) earlier this year rolled out two new mutual funds, focusing just on corporate bonds


J & T Bond


J & T is a mixed Bond mutual fund investing primarily in corporate bonds, which holds in its portfolio or would be willing to hold itself J & T Banka. The Fund is not bound by any benchmark or rating of the issuer's bonds. "With the new funds to our clients easily and diversified way make available investment opportunities, which would need to drive and one million for investment," says Martin Kujala, portfolio manager of the fund. The Fund is denominated in Czech koruna and the euro. Minimum initial investment is CZK 300, respectively.€ 20, the recommended investment horizon is 3 years.


Generali PPF Dividend Corporate Bond Fund


"Current developments in the stock market is largely uncertain. Europe tugging at the scarecrow in the form of debt crisis, prospects of Asian economies is rather negative in the U.S. we are seeing only a very fragile recovery. In such an environment, stock indices experienced higher volatility and uncertain direction for future development. In these times of dynamic and investors looking for a place to save your money and protect them against possible declines in equity. An alternative might be for them Dividend Fund PPF Generali corporate bonds, which means less investment risk while maintaining an interesting yield. It will pay shareholders an annual dividend yield form.Corporate bond funds over the last ten years quite successfully survived all the major turbulence in the markets. Their main advantage is the rapid return to its actual (fundamental) value, "says the chief investment strategist Michael Valentík.


Generali PPF Dividend Fund carefully corporate bonds spreads its investments across regions, sectors and issuers. Fund's portfolio contains approximately 50 individual titles. This approach significantly reduces the impact of credit risk that is associated with an investment in corporate bonds. The fund also includes quality bonds of companies that consistently achieve profits, and currency hedging in the Czech crown.

"Corporate bond funds are doing better than make a profit broadly diversified equity funds during periods of exchange and average earnings. In turn, the growth of corporate bond funds outperform long-term defensive equity funds. Therefore, corporate bond funds may become a cornerstone of a stable investment portfolio, concludes Michael Valentík.

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