Earnings season has been erratic thus far, but overall corporate America is healthy and that bodes well for high grade bonds, said Craig Bishop, Lead Strategist U.S. Fixed Income Strategies Group for RBC Wealth Management. ‘We’ve seen good earnings and some poor earnings, but overall we are positive on the corporate bond space, especially the investment grade space,’ said Bishop. Bishop added that his focus has been on the triple B-rated area of the corporate bond market. In terms of duration, he is finding the best yield opportunities on the six to eight year maturity range. Speaking of yield, Bishop said he is cautious on high yield bonds, especially the energy names in the wake of last year’s selloff. ‘We’ve been selectively focusing on non-energy names, adding them to some of our portfolios, but overall we think that’s a market where we think we are going to continue to see more pressure in the near term and we will wait for better opportunities,’ said Bishop. As for municipal bonds, Bishop said new issuance has been driven this year by municipalities refunding high yielding debt and that has caused an imbalance in the market. He said that supply overhang has lessened since interest rates started moving up in the Spring and that has helped improve performance.
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