Our views

Brexit comment - high yield bonds

Azhar Hussain, Head of Global High Yield

27 June 2016

We will have a clearer idea of the short-term performance and duration impact of Friday’s news on the Fund this afternoon. Most high yield short duration bonds have fallen between 0.5 and 1 point, compared to a wider market reaction of 2-3 points. We estimate that the Fund’s duration would be unchanged and that there would be an increase in yield corresponding to the fall in the price of the Fund.

We think it likely that some calls will be delayed as corporates reassess their refinancing plans in the wake of the vote. This will allow us to accrete more than the estimated yield on the portfolio. We continue to be happy with every single one of our investments, even in this altered environment.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice. Sub-investment grade bonds have characteristics which may result in a higher probability of default than investment grade bonds and therefore a higher risk. Derivatives may alter the economic exposure of a fund over time, causing it to deviate from the performance of the broader market.