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Oct 2021

Investment Grade Corporates: History Lessons for Ahistorical Times

As the Federal Reserve winds down its Secondary Market Corporate Credit Facility (SMCCF), let’s take a long-term look at the investment grade corporate bond market. The purpose of this exercise is to compare the past to the present and see what this might tell us about the future. Last year, the Fed engineered an unprecedented intervention in the asset class. Today, investors in high grade corporate bonds face historically low yields, tight spreads and a high degree of interest rate sensitivity. However, as the global economy continues to reopen, and corporate profitability and earnings growth remain strong, the spread should remain range-bound. In my view, the main risk to investment grade bonds remains in the sector’s elevated sensitivity to higher interest rates.

ABOUT THE AUTHOR

ABOUT THE AUTHOR

  • Monica Erickson, CFA

    Global Developed Credit - Investment Grade

    Monica Erickson, CFA

    Global Developed Credit - Investment Grade

    Ms. Erickson joined DoubleLine at its inception in 2009. She is Head of Investment Grade within the Global Developed Credit group and participates in DoubleLine's Fixed Income Asset Allocation committee. Prior to DoubleLine, Ms. Erickson was a Vice President in the Corporate Bond group at TCW where she was involved in the management of the Firm's corporate credit fixed income and structured products. Previous to TCW, she was a Vice President at Froley, Revy Investment Company, active in managing several convertible strategies. Ms. Erickson holds a BS in Business, summa cum laude, from the University of Southern California. She is a CFA® charterholder, a past board member of CFA® Society of Los Angeles, and the current chair of the Charter Recognition committee for the CFA® Society of Los Angeles. Ms. Erickson is also on the Educational Committee of 100 Women in Finance.