Schroders upgrades global corporate bonds on easing U.S. recession risks

(Reuters) -Schroders upgraded its outlook for global corporate bonds to 'neutral' from 'negative' on Wednesday and maintained its positive view on global equities as it expects reduced risks of a U.S. recession.

The British asset manager upgraded its stance on both U.S. investment grade and high yield bonds to 'neutral' from 'negative' backed by stabilising growth, rising demand and positive consumer sentiment data.

In May, Moody's downgraded the U.S. sovereign credit, while President Trump's tariff policies has caused some volatility in benchmark Treasury bonds, which in turn have lifted corporate bond yields.

U.S. junk bond issuance totaled $28.9 billion in May, the most for a month since September 2024, according to brokerage J.P. Morgan.

Schroders said the "biggest risks seem to have passed" for U.S. investment grade credit but pointed out that valuations remain high for domestic corporate bonds overall.

"Now, the market can pay more attention to deregulation and government spending," it added.

Earlier this month, data from the Treasury Department showed foreign investors' holdings of U.S. Treasuries showed a modest decline in April from record levels of U.S. debt.

The asset manager reiterated its positive stance on global equities, including U.S. equities. It maintained a negative outlook on the dollar.

"While economic uncertainty persists, we think downside risks are contained and the risk of recession this year is lower," they added.

(Reporting by Siddarth S in Bengaluru; Editing by Tasim Zahid)