There are opportunities in corporate bonds

PenderFund’s Geoff Castle believes there is always one security probing the bottom, while another one is reaching its high

Michael Ryval 17 January, 2019 | 6:00PM

Investment-grade corporate bonds in the U.S. have been punished recently, as the so-called spread over treasuries has widened by about 75 basis points (bps) since October. And the fixed income environment could not get any gloomier, given that the Federal Reserve raised interest rates again on December 19th, although it did signal that the pace of increases may slow in 2019.

But bond specialist Geoff Castle is reluctant to predict where interest rate may go. “It doesn’t take a genius in the current market environment to surmise that the Fed’s opinion of the economy might have turned a little bit south,” says Castle, a portfolio manager at Vancouver-based PenderFund Capital Management Ltd. “But I have no formal forecast. There, however, is a lot of gloom and doom.”

And therein lie the opportunities, argues Castle, who oversees the 5-star $543.6 million Pender Corporate Bond Fund Series F. Castle believes in the perspective espoused by The Sound of Music’s Fraulein Maria, (“Whenever the good Lord closes a door, somewhere He opens a window”) and maintains that there is always one security probing the bottom, while another one is reaching its high. “You try to find those things are making some kind of ultimate bottom. That’s one way of making money. To do that, you have to take on an unpopular opinion.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Beazer Homes USA Inc11.93 USD4.28
Grupo Famsa SAB de CV Class A0.09 -10.00
Zillow Group Inc A97.85 USD3.21

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Michael Ryval

Michael Ryval  

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