Narrowing spreads have eroded value but the worst is over

There has been a lot of interest in corporate bond funds this year as investors have sought to make their cash work harder against a backdrop of low policy rates.

Those who made this move have been well rewarded. With it appearing unlikely central banks will move to raise rates any time soon and amid a resurgence in risk appetite and an improvement in economic indicators, spreads have tightened considerably, narrowing in excess of 200 basis points. The asset class has strongly outperformed gilts. Some may now be asking if the best is behind us. While spreads narrowing means some value has been eroded, I still believe investment grade corporate bonds show good long-term prospects. Even after the improvement of recent months, spreads are still wi...