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Multi-Sector Credit Asset Allocation Perspectives: Relative value shifts in fixed income

How has relative value shifted across fixed income sectors amid tariff-related volatility and what does this mean for asset allocation? The Multi-Sector Credit Asset Allocation Perspectives explore this and why diversification is key.

John Kerschner, CFA

Head of US Securitised Products | Portfolio Manager


Colin Fleury

Head of Secured Credit | Portfolio Manager


John Lloyd

Lead, Multi-Sector Credit Strategies | Portfolio Manager


Seth Meyer, CFA

Global Head of Client Portfolio Management | Portfolio Manager


29 Apr 2025
4 minute read

Key takeaways:

  • Tariffs are likely to ultimately settle well below initial numbers in our view. If employment substantially weakens, the US Federal Reserve (Fed) is well-equipped to step in given current monetary policy.
  • High yield (HY) corporate debt valuations are more compelling with spreads near the median of the last 10 years; lower bond prices offer better convexity and total return potential.
  • Many fixed income sectors are offering attractive yields in the mid-to-high single digits with lower historical volatility than equities. Fixed income assets are exhibiting low or negative correlation to equities, making them an essential diversifier of investment portfolios.

The Multi-Sector Credit Team share perspectives on the fixed income market and their quarterly asset allocation ranking. They highlight a timely chart to watch, explore relative value opportunities, and provide insight on their latest asset allocation scores by fixed income sub-sector.

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IMPORTANT INFORMATION

Fixed income securities are subject to interest rate, inflation, credit and default risk. As interest rates rise, bond prices usually fall, and vice versa. High-yield bonds, or “junk” bonds, involve a greater risk of default and price volatility. Foreign securities, including sovereign debt, are subject to currency fluctuations, political and economic uncertainty and increased volatility and lower liquidity, all of which are magnified in emerging markets.

Securitized products, such as mortgage- and asset-backed securities, are more sensitive to interest rate changes, have extension and prepayment risk, and are subject to more credit, valuation and liquidity risk than other fixed-income securities.

Collateralized Loan Obligations (CLOs) are debt securities issued in different tranches, with varying degrees of risk, and backed by an underlying portfolio consisting primarily of below investment grade corporate loans. The return of principal is not guaranteed, and prices may decline if payments are not made timely or credit strength weakens. CLOs are subject to liquidity risk, interest rate risk, credit risk, call risk and the risk of default of the underlying assets.

Bank loans often involve borrowers with low credit ratings whose financial conditions are troubled or uncertain, including companies that are highly leveraged or in bankruptcy proceedings.

Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

There is no guarantee that past trends will continue, or forecasts will be realised.

 

Marketing Communication.

 

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Important information

Please read the following important information regarding funds related to this article.

Janus Henderson Capital Funds Plc is a UCITS established under Irish law, with segregated liability between funds. Investors are warned that they should only make their investments based on the most recent Prospectus which contains information about fees, expenses and risks, which is available from all distributors and paying/facilities agents, it should be read carefully. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The rate of return may vary and the principal value of an investment will fluctuate due to market and foreign exchange movements. Shares, if redeemed, may be worth more or less than their original cost. This is not a solicitation for the sale of shares and nothing herein is intended to amount to investment advice. Janus Henderson Investors Europe S.A. may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation.
John Kerschner, CFA

Head of US Securitised Products | Portfolio Manager


Colin Fleury

Head of Secured Credit | Portfolio Manager


John Lloyd

Lead, Multi-Sector Credit Strategies | Portfolio Manager


Seth Meyer, CFA

Global Head of Client Portfolio Management | Portfolio Manager


29 Apr 2025
4 minute read

Key takeaways:

  • Tariffs are likely to ultimately settle well below initial numbers in our view. If employment substantially weakens, the US Federal Reserve (Fed) is well-equipped to step in given current monetary policy.
  • High yield (HY) corporate debt valuations are more compelling with spreads near the median of the last 10 years; lower bond prices offer better convexity and total return potential.
  • Many fixed income sectors are offering attractive yields in the mid-to-high single digits with lower historical volatility than equities. Fixed income assets are exhibiting low or negative correlation to equities, making them an essential diversifier of investment portfolios.