NEW YORK (TheStreet) -- 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 for RBC Wealth Management's U.S. Fixed Income Strategies Group
"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 in the energy sector 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. Meanwhile, he said the problems in Puerto Rico and Chicago are contained and will not contaminate the entire market.
"Overall we think munis for high tax-bracket investors are really some of the better opportunities right now," said Bishop.
Regarding Treasuries, Bishop has been telling investors not to expect a big jump in interest rates based on Federal Reserve rumors. He said the yield on the benchmark 10-year Treasury will likely remained range-bound between 2.25% and 2.4% the rest of the year.
Finally, Bishop recommended investors to be cautious with emerging market bonds as a result of a Fed seeking to raise rates coupled with China's recent economic slowdown and stock market volatility.
"As the Fed begins to raise rates at some point, the dollar will strengthen, and that is going to hurt a lot of these emerging market economies," said Bishop. "Longer term, there will be opportunities but we want to be patient now."