Wells Fargo Asset Management head George Bory has said bonds are officially in a bear market.
Speaking during the Bloomberg Surveillance show, Bory said that the bear market will possibly continue across 2021 as yields embark on an upward trajectory.
With the bear market, Bory opines that it is an opportunity for investors to buy at a lower price.
Bory notes that investors can look out for diversifiers, especially outside the non-dollar bonds that are currently outperforming the United States bonds. However, Bory points out that amid the bear market, investors are not immune to losses.
Bory adds that investing in non-dollars bonds can be lucrative in the long-term, especially when converted back to U.S. dollars.
“And in some instances on a hedged basis, bringing that money back to dollars can put you in a positive yield strategy. So the central message you have to cast your net as wide as possible. You have to be diversified, and you have to focus and anchor your position in relatively short portions of the curve,” said Bory.
He adds that yield investors should be on the lookout for scenarios that can return possible profits. Bory says the domestic and global markets carry both nominal and real yields to offset the rise in yields.
The official also calls for caution when scouting for companies offering credit. He points out that the company should offset the upward drift that pushes yields upward. However, Bory affirms that settling on such a company is always a challenge hence the need for discipline in building a portfolio.
Concerns over health of U.S. bonds market
Bory’s sentiments come barely two weeks after the U.S. government initiated a bond-sell-off. The move resulted in speculation about the health of the U.S. bond market.
However, following the American Rescue Plan’s introduction, the U.S. treasury bonds officially entered a bear market after declining by at least 20% from the prior peak.