'Few Places To Hide': Investors Seek Shelter As Stocks, Bonds Fall Together

• Declines in bonds and stocks are sending investors into defensive products such as credit swaps, convertibles and even cash as they seek refuge from the market’s recent gyrations. 
• BlackRock Inc's iShares iBoxx $ Investment Grade Corporate Bond ETF has fallen by nearly 7% year-to-date to its lowest level since April 2020, as expectations of higher interest rates and persistent inflation dim the allure of bonds across the fixed-income spectrum. That is in line with losses across major stock indexes, which have also been hit by worries of tighter Fed policy. The S&P 500 has dropped 7.3% year-to-date and the Nasdaq Composite is down by about 11%. 
• The side-by-side tumbles have dealt another blow to a decades-old strategy that relied on a mix of bonds and stocks to take the sting out of equity declines, with bond prices ideally moving higher during periods of stock market volatility. 
• The search for defensive products comes amid worries of more volatility across asset markets, as an expected 150-175 basis points in rate increases over the next year threatens to further buoy bond yields and weigh on stock valuations. 
• For some investors, anticipation of more wild swings in asset prices has heightened the appeal of credit swaps, which are used to insure against the risk of corporate defaults.

(Source: Reuters)