Multi-Asset Income Opportunities with an Inverted Yield Curve

Yield, Duration and Credit Quality Are Key for Multi-Asset Strategies

In any environment, multi-asset investors should prudently balance risks across equity, corporate credit and government bonds. But near-term tactical shifts can help take advantage of ever-evolving market conditions in the pursuit of long-term returns.

With this in mind, we think today’s inverted yield curve has created a positive environment for short-term bonds—investment-grade corporate bonds, in particular. They offer compelling income potential along with relatively lower interest-rate risk, or duration, than longer-term bonds and safe-haven assets such as global treasuries. Short-duration investment-grade corporates, as measured by the Bloomberg Global Aggregate Corporate 1–3 Year Index, had a duration of 1.8 years and a yield to worst of 5.4% at midyear, yielding more than intermediate-term investment-grade bonds and global treasuries (Display).