Bondmageddon: Don’t Fight the Curve

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DoubleLine Portfolio Manager Ken Shinoda returns with his latest Channel 11 update at a time when the bond market is taking a beating. “It’s been somewhat of a bloodbath, especially in longer-duration bonds,” Mr. Shinoda says, with the five-year U.S. Treasury yield back at 5% from under 3.75% in April and the 30-year Treasury near levels not seen since the early 2000s. Stocks keep hitting new highs, but the rally is narrow, driven by a handful of Mag 7 names as market breadth sits at its weakest level since the dot-com era. Booming commodities and a surge in AI-driven capital expenditure are feeding strong growth and stubborn inflation concerns, and the market is now pricing in several Federal Reserve hikes.

Mr. Shinoda is quick to point out that this is nowhere near 2022. Today’s higher yields cushion the damage, with Treasuries down about 2.8% this year compared with double-digit losses back then. In this environment, he sees the most interest in short-duration, high-quality securitized credit and floating-rate paper. They pay 120 to 150 basis points over short Treasuries or SOFR without taking on long-end risk. He also flags a growing divergence in corporate credit, where SpaceX and Oracle trade like below-investment-grade names, and a jump in French spreads to the widest level versus Germany since the 2011 to 2012 sovereign crisis. “Whenever you see this hockey stick move up, it’s not really a good sign,” he says.

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DoubleLine Capital LP

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DoubleLine has been managing money for insurers since its inception in 2009. The firm's focus on securitized fixed income and risk management positions it well to manage money for insurers. The firm offers an array of fixed income strategies including dedicated ABS, private ABF, CLOs, infrastructure debt, non-QM, commercial and residential loans, multi-sector fixed income and EM. We understand that the needs of each insurer can vary, and our insurance team is focused on providing our clients with unparalleled access to the investment team and creating custom solutions to meet their distinctive objectives. DoubleLine wants to be your fixed income partner.
 

Paul Schroeder, CFA   
Relationship Manager- Insurance  
paul.schroeder@doubleline.com
Direct: 213-372-3123
Main: 813-791-7333
 

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