Demand from income hungry investors is likely to stay strong

Given the magnitude of the contraction in credit spreads in 2009, it is reasonable for investors to question whether there is scope for further progress in 2010.

We believe it is possible the extent and speed of the spread contraction witnessed in 2009 was a once in a lifetime event. However, our research suggests further progress is possible in 2010, although not on the scale of last year’s move. Why do we still like high yield? With yields on government bonds at historically low levels, demand for high yield bonds from income-hungry investors is likely to stay strong. In addition, our research suggests the risk/reward profile of the high-yield asset class is attractive as credit fundamentals are sound and there is potential for further spread...