Analyst: Buy High Yield Corporate Bonds Because Fed Isn’t Raising Rates

high-yieldPrudential Financial’s top strategist said today in a Bloomberg interview that investors should be all over high-yield corporate bonds right now, because the Fed isn’t raising rates — no matter how good the jobs number is.

Analyst Robert Tipp noted that investors will find good returns in corporate bonds and structured securities. From Bloomberg:

“Investors that are in the higher-yielding sectors, within whatever is their risk parameter set, are going to do very well over the long run, especially relative to where cash rates are going to be,” said Tipp, chief investment strategist for the insurer’s fixed-income division. “The Fed’s going to have a very hard time raising rates.”

“You have almost as many people coming into the labor force as there are jobs,” he said. “And I think this is something that the Fed wants to see continue, it’s not something that they’re going to want to stop.”

Today’s strong jobs number took just about everyone by surprise, with 255,000 workers added in July. The most bullish estimate pegged a 180,000 gain, and some analysts expected much less than that.

Tipp also added that the unchanged 4.9% unemployment rate in July is another piece of evidence the Fed can use to delay a rate hike.

Investors looking to gain exposure to high-yield corporate debt can do so via the iShares iBoxx $ High Yid Corp Bond ETF (NYSE:HYG). The HYG, which currently yields about 5.55%, closed up $0.19 (+0.22%) on Friday at $85.54 per share. HYG has gained a reasonable 6.16% year-to-date, putting it roughly in-line with the S&P 500 index.


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