Bonds are the most expensive since 1999 and that raises the chances of a rapid sell-off, TwentyFour Asset’s Bowie wrote in a note citing a duration-yield model. In addition to cutting duration, he is boosting the credit quality of his portfolio to minimize risk.
“At this very late stage of the cycle, we believe now is not the time to be reaching for yield by increasing credit risk, and consequently prefer to keep our credit spread duration low and our credit quality high,” Bowie said. “Corrections in risk assets can be swift and painful.”
This article was provided by Bloomberg News.