Have we seen the low point for corporate bonds in this cycle?

By the end of 2008, credit yield spreads over government bonds had reached levels not seen since the 1930s.

But as governments firmly underlined that the banking system and its major players were too big to fail, the credit market began to recover. Subsequent economic data has indicated a reduction in the rate of economic slowdown and the credit market has gone on to record a dramatic rebound in the second quarter. So have credit yield spreads returned to fair value? The long-term (90-year) average annual yield premium for bonds issued by BBB-rated companies is around 2% over government debt. The average BBB-rated sterling corporate bond today yields about 4.75% over gilts, or 2.75 % more than...