War's Shadow: Investors Seek Bargains in Volatile Credit Markets

The credit market has experienced a significant selloff following the onset of the Iran war on February 28th. This volatility has prompted some money managers to seek out investment-grade bonds that are now oversold, believing that strong underlying fundamentals will help them navigate the economic uncertainties and conflict.

Firms like Paragon Capital Management are selectively increasing exposure to European investment-grade financials, noting cheaper valuations compared to global peers. Similarly, Aberdeen Investments favors Asian notes in sectors such as utilities and telecommunications, citing stronger local revenue and earnings visibility. These investment choices are driven by the fact that global credit spreads have reached their widest point since June 2025.

Despite these opportunities, a segment of investors remains wary. They contend that the full long-term financial implications of the war have not yet been reflected in credit market pricing. A key indicator shows that the risk premium on global investment-grade bonds is still below its 10-year average, suggesting that the market may not be fully valuing the existing risks.

Nevertheless, the view that the recent market downturn offers a chance for dip-buying persists. Some managers are actively looking to accumulate oversold bonds, intending to take advantage of price fluctuations to enhance their bond positions. This approach acknowledges near-term volatility but focuses on the potential for attractive entry points.