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BlackRock downgrades IG credit to neutral, ups exposure to high-yield bonds

Published 09/08/2020, 06:22 AM
Updated 09/08/2020, 07:30 AM
© Reuters. FILE PHOTO: A sign for BlackRock Inc hangs above its building in New York

By Repeats to add Reuters Instrument Code

LONDON (Reuters) - The BlackRock Investment Institute said on Tuesday it downgraded investment grade debt to neutral, citing little room for spread compression given that deeper rate cuts and more asset purchases are an unlikely policy response.

However, BlackRock (N:BLK) raised its "overweight" on high-yield bonds.

"We see the very high implied default rates as overly pessimistic, and high yield remains an attractive source of income in a yield-starved world," BlackRock wrote in its note to clients.

BlackRock also downgraded emerging market local currency debt to underweight, saying many countries had limited policy space to cushion the pandemic shock and insufficient capacity to rein in virus spread.

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