Back to Fashion: High-Grade Corporate Bonds

High-quality corporate bonds are higher Friday after recovering Treasuries as a safe haven to growing fears that the politician of the year the economy may lead cliff.

Collect one year fought in grade bonds to move forward in recent weeks, as investors paused to consider how the prices could go yields, which move in opposite contrast, prices were at their lowest. The optimism that politicians should the financial crisis of the automatic spending cuts and tax increases on 1 January assume solve, also improved the outlook for U.S. stocks, which reallocate some bond investors.

Just this week, investment-grade bond funds recorded a net loss $ 860 million leaves what. The first withdrawal of money from these funds after 14 consecutive months of collection in the amount of $ 180 billion for Bank of America Merrill Lynch

But after House Speaker John Boehner was the conservative base of his party to mobilize, would agree to a plan to raise taxes for most Americans on Thursday night, obligations prevent high quality are back in style.

Solutions Service price reference point shows that on average fell 10 years and 30 years Bonds 0.02 percentage points on Friday.

A deposit of 10 years of Israel Teva Pharmaceutical Finance Co. has in the price of $ 100.551 $ 100.335 raised by its yield sends from 0.02 percentage points to 2.89%, depending MarketAxess.

Grade bonds are not as much force as Treasuries, where the 10-year yield fell 0.046 percentage points to 1.754% to collect. Risk premiums caused - or spreads - to expand, which means corporate bonds were seen as relatively more risky than Thursday.

Derivatives related to the obligations of good quality companies 4% lower, even with the cost of protection against failures on the rise. Markit CDX North America Investment Grade Index suggests that the average annual cost of protecting $ 10 million bond default has risen from $ 89,000 to $ 93,000, the highest level in a week.

However, some asset managers to solve much of the supposed end of the year deadline to the fiscal problems of the nation concerned.

"I'm not an emergency," said John Leka, CEO of Portland-based binding headshop Capital Corp. "I do not see a politician let us down the cliff, then throws him out of office when their term of office has expired. I see almost an impossibility. "

Jesse Fogarty, portfolio manager at Cutwater Asset Management in New York, said a lack of political progress has the potential to lead to a sell-off in the lower part of corporate bonds. However, he said that all those who are new to "very difficult" given the bond markets are little action at the end of December want.