Finding value in the 'crossover' credit zone between IG and HY

Lombard Odier IM's Kevin Corrigan explores opportunities in the 'crossover' credit zone - a lesser-loved group of corporate bonds rated BBB and BB - which sit either side of the divide between investment grade and high yield bonds.

With investors normally focusing on either investment grade (BBB and above) or high yield (BB and below) credit, any bond rating moving towards the dividing line can find itself in something of a twilight zone. For less constrained investors, this crossover zone of corporate bonds rated BBB-BB can be a fertile hunting ground. Looking back on 2015, it was a near-perfect storm for BBB and BB corporate bonds in Europe. BBB credits underperformed their high rated counterparts both in spread performance and in total returns. That said, BBB credits now yield higher than a year ago, despite mor...