Invesco Bond Income Plus Limited: Navigating the high yield bond market in 2022

By Rhys Davies, Fund Manager and Senior Credit Analyst.

Sponsored by Invesco.

Rising inflation, interest rate hikes, market volatility. What does this all mean for bond markets, and specifically high yield bonds? Can opportunities be found within this sector?

Rhys shares his thoughts and gives an update on the Invesco Bond Income Plus Limited investment trust within this market landscape.

Navigating the high yield bond market in 2022

Glossary of terms

Duration

Duration is a measurement of a bond's sensitivity to changes in interest rates. Duration is expressed in years and takes into account factors including how long before the bond matures, its yield and coupons.

Maturity

Related to bonds with a final end date ("maturity date"), this is the length of time until the principal amount of a bond must be repaid by the issuer.

Credit risk

Credit risk is the possibility or risk of loss that may happen from a borrower’s failure to repay a loan.

Credit spread

Credit spread is the difference in yield between bonds of the same maturity but different credit quality for example, a government bond and a corporate bond of the same maturity. The yield on a government bond is usually considered to be a benchmark rate and so the credit spread indicates the additional risk that lenders take when they buy a corporate bond vs a government bond of the same maturity.

Credit spreads are measured in basis points, for example a 1% difference in yield would be equal to a spread of 100 basis points.

Credit spread widening

Credit spread widening means there is an increase in the credit spread.

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

When making an investment in an investment trust you are buying shares in a company that is listed on a stock exchange. The price of the shares will be determined by supply and demand. Consequently, the share price of an investment trust may be higher or lower than the underlying net asset value of the investments in its portfolio and there can be no certainty that there will be liquidity in the shares.

Invesco Bond Income Plus Limited has a significant proportion of high-yielding bonds, which are of lower credit quality and may result in large fluctuations in the NAV of the product.

The product uses derivatives for efficient portfolio management which may result in increased volatility in the NAV.

The use of borrowings may increase the volatility of the NAV and may reduce returns when asset values fall.

The product may invest in contingent convertible bonds which may result in significant risk of capital loss based on certain trigger events.

As a result of COVID-19, markets have seen a noticeable increase in volatility as well as, in some cases, lower liquidity levels; this may continue and may increase these risks in the future.

Important Information

Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

For more information on our products, please refer to the relevant Key Information Document (KID), Alternative Investment Fund Managers Directive document (AIFMD), and the latest Annual or Half-Yearly Financial Reports.

Further details of the Company’s Investment Policy and Risk and Investment Limits can be found in the Report of the Directors contained within the Company’s Annual Financial Report.

If investors are unsure if this product is suitable for them, they should seek advice from a financial adviser. For details of your nearest financial adviser, please contact IFA Promotion at www.unbiased.co.uk

Issued by Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.

Invesco Bond Income Plus Limited is regulated by the Jersey Financial Services Commission.