Sell Pricey Munis, Buy Corporates as Hawkish Fed Flummoxes Bond Buyers

A large number of investors have never seen the Federal Reserve in a hawkish mindset and that will create bond buying opportunities this year, even in the troubled high yield sector, said Andy Chorlton, head of multi-sector fixed income at Schroders. 'The economy is not as bad as you would think given rates are so low so I think this year could be pretty interesting,' said Chorlton. 'There are lots of opportunity between the different sectors and within those individual sectors.' As for the high yield market, Chorlton said that the lack of issuance in recent weeks, especially compared to investment grade debt, is bullish for the overall junk bond sector because 'supply corrects itself.' According to Chorlton, credit markets have tested investors over the last year as U.S. corporate bond yield spreads have continued to widen, and the slightest disappointment on individual names, especially in the energy sector, have been met with intense reactions.