FYI: Late last year, investors sought to reduce risk by sprucing up the quality of their fixed-income portfolios. The move to securities rated “A” or better widened the spread in yield between the highest-rated corners of the corporate bond market and those with less-stellar credentials to levels not seen for several years.
As fears of inflation, trade disputes and interest rate hikes wore off, the selloff in late 2018 turned into a rally for credit markets at the beginning of this year, particularly among bonds with non-top-tier ratings. Investment-grade markets returned roughly mid-single digits in the first quarter alone. High yield did even better.
The $4.1 billion MFS Corporate Bond Fund benefited as investors decided to take a more “risk-on” stance in search of yield and gravitated to “BB” and “BBB” rated issuers, an area where the fund has a long history of being overweight relative to its benchmark, the Bloomberg Barclays U.S. Credit Bond Index. (“BBB” is the lowest investment-grade rating assigned by Standard & Poor’s, while “BB” is the highest non-investment-grade rating.) As of March 31, the MFS fund had nearly 70% of its assets in those two investment categories, with the lion’s share of that in “BBB” securities. Thanks largely to that positioning, the fund’s “I” shares outperformed the Bloomberg index during the first quarter of 2019, returning 5.60% while the index returned 4.87%.
Regards,
Ted
https://www.fa-mag.com/news/to-catch-a-rising-star-45540.html?printM* Snapshot MFBIX:
https://www.morningstar.com/funds/XNAS/MFBFX/quote.html
