Allianz Investment: The Federal Reserve has begun a rate-cutting cycle, and U.S. short-term high-yield bonds can provide investors with stable returns

According to the Zhitong Finance APP, Chen Jiaying, Senior Product Specialist at Allianz Investment, stated that as inflation continues to decline, the Federal Reserve has begun its interest rate cut cycle. Many investors should consider locking in higher returns while interest rates are high. Short-term high-yield bonds in the United States can provide an attractive option for investors. The main reason is that the coupon yield of short-term high-yield bonds is higher than that of high-rated bonds, with relatively low volatility. Additionally, the financial performance of companies in the short term is more predictable, providing investors with a more robust income option.

Short-term high-yield bonds refer to bonds with a maturity of less than five years, and their appeal lies in the good balance between risk and return. Although referred to as high-yield bonds, short-term bonds typically have lower interest rate risk compared to long-term bonds. Chen Jiaying explained that due to the relatively short maturity of short-term bonds, investors can more effectively predict a company's cash flow and financial condition, which makes the trend of short-term bonds more stable.

In the context of sustained economic growth in the United States, coupled with employment and inflation indicators showing signs of easing, the market for high-yield bonds appears particularly favorable. Currently, the yield in the U.S. high-yield market exceeds 7%, and the default rate has remained below the long-term average level. Chen Jiaying mentioned that this supports the performance of short-term high-yield bonds. Compared to other regions, U.S. high-yield corporate bonds can provide investors with relatively high visible returns.

Currently, the Allianz U.S. Short Duration High Yield Bond Fund managed by Chen Jiaying and her team focuses on investing in high-coupon short-term bonds. She pointed out that our goal is to provide investors with stable coupon income rather than pursuing short-term capital appreciation. This strategy can help investors achieve relatively stable returns in uncertain markets.

When discussing investment strategies, Chen Jiaying emphasized the importance of diversification. "Our short-term high-yield bond fund will avoid excessive concentration on individual industries or companies to maintain good diversification." She stated that the fund management team closely monitors the cash flow and financial condition of companies to select those with robust financial performance.

In addition to the short-duration bond strategy, investors may also consider another multi-asset income and growth strategy, which can provide a one-stop solution for income and growth. The multi-asset income and growth strategy can focus on high-yield bonds, convertible bonds, and stocks in the U.S. market, aiming to capture the coupon and dividends of these assets and distribute realized profits to investors.

She emphasized that the volatility of a hybrid strategy is lower than that of a pure equity strategy, providing better risk management and stable coupon income while capturing potential growth in the U.S. stock market, making it suitable for investors deploying in the currently expensive U.S. market to achieve an ideal risk-return ratio.

Chen Jiaying further pointed out that the above strategies are not based on predicting market trends. The focus is on selecting companies with profit growth potential and the ability to capture future market share, or choosing companies with excellent financial fundamentals from a balance sheet perspective. In terms of the U.S. market, high-quality companies still have a high likelihood of achieving profit growth in the future, while small and medium-sized enterprises benefit from interest rate cuts, providing good long-term support for U.S. assets