JPMorgan, PGIM Say It’s Time to Buy High-Grade Bonds With 88% Trading at Discount

Most of the US investment-grade bond market is trading at a discount, and PGIM and JPMorgan say it’s time to buy.

About 88% of high-grade bonds in a Bloomberg index are trading below par through Tuesday, according to data compiled by Bloomberg. That compares to just 4% a year ago, highlighting the destruction on fixed-income returns wrought by inflation and a historically aggressive Federal Reserve rate-hike program.

The magnitude of that drawdown has inevitably created bargains in the blue-chip bond market, according to PGIM’s Michael Collins. While strategists have warned that risk premiums are due to climb as the Fed continues to tighten, corporate default rates are still very low relative to previous downturns, a welcome sign for oversold corporate debt, Collins said.

“We’re seeing the bonds across the board, across all of our portfolios, trading at big discounts to par and as you know as long as they don’t default, they end up back at par,” Collins, PGIM senior portfolio manager, said on Bloomberg Television. “So you have this really positive long-term opportunity in fixed-income which we haven’t had in well over a decade.”