Are corporate bonds sensitive to ESG and news sentiment?

In my Financial Investigator columns of May and June 2020 and February 2021, I have written about the role of news sentiment in stock and index investing. We have seen how monitoring sentiment in news and social media can help reduce risk and generate alpha, be it as a stand-alone signal or as an overlay of existing investment strategies. The role of ESG scores in stock investing has also featured in my columns of July 2020 and March 2021.

But, of course, a well-diversified portfolio does not consist of equity only. Fixed income instruments such as government and corporate bonds often make up a large part of an investment portfolio. What about sentiment signals for that part of your portfolio? And what can we say about the interplay between corporate bond performance versus ESG scores? These are the topics of two Probability & Partners papers, recently published on our website, in which we focus on bonds rather than stocks.