The credit world’s version of the “Trump trade” is beginning to take shape: Buy American high-yield bonds and steer clear of anything inflation-sensitive.
Corporate bond investors around the world have already started positioning to benefit from a potential Donald Trump election victory after an assassination attempt and the Republican National Convention boosted his position in polls. Spreads on US high-yield bonds strengthened compared with their euro counterparts in the past week and junk funds globally saw a surge in inflows.
“US high yield is the trade,” said Al Cattermole, a portfolio manager at Mirabaud Asset Management. “It is more domestic-focused and exposed to US economic activity.”
In a late June interview with Bloomberg Businessweek, Trump said he wants to bring the corporate tax rate down to as low as 15%. That lower expense could improve the creditworthiness of weaker firms. US companies could…
